Most people are feeling the pressure of the heightened cost of living in recent years. This is even more true if you have a family to worry about, as well as other responsibilities. With this in mind, everyone should have a plan for making what money they have go further.
There are two basic ways to improve your financial situation. You can either earn more money, such as by changing your career, picking up a second job, or starting a side hustle or small business. Or you decrease your expenses, which is far easier said than done.
Those subjects could take up multiple articles on their own. But what about the money you do have? How can you use that?
Diagnosing Your Financial Health
The first step is always to diagnose the problem. A doctor diagnoses a patient by inspecting them, and you need to do the same with your finances. Check your bank balance and work out how much money you have and where it’s going.
For example, if you find that your expenses are higher than your income, the most important thing to do is rectify this situation. Whether you earn more money, spend less, or ideally do both, you should work on ensuring that your income is always higher than your expenses. Even if it already is, every household can benefit from widening that gap.
Setting a budget is a good step. From there, you can determine what to do with your money, including what your next goals will be.
If you’re in debt, reducing this is the best way to lower your expenses. It’s easy to get into a debt spiral and, while it’s hard to get out of it, it is always possible. When setting a budget, prioritize paying off your debts as quickly as possible. This will give you more money to play with later down the road.
So, what can you do with the money you do have? Should you save or invest your money?
Saving or Investing?
The short answer is “Yes.”
There are benefits to both saving and investing.
Saving money gives you a safety net to fall back on, especially if you manage to save a few month’s worth of your income. If you get an unexpected expense, you will be able to use your savings and hopefully cushion any financial issues, potentially preventing debt.
You can also save for large purchases that you do expect. Again, this prevents you from going into unnecessary debt, allowing you to foster a healthier financial future.
Many people want to save for the future. This is a good idea, but a potentially better option would be to invest any savings that you do have. While saving is a much better option than wasting your money, the downside is that inflation currently outshadows any interest you might earn on your savings. This means that, in years to come, your money will be worth less than when you saved it.
On the other hand, investing your money allows your money to work for you. By actively using your money, you can build your wealth.
How to Make Sound Investments
One of the greatest downsides of investing your money rather than saving it is that there is always a measure of risk involved. While you can make a return on your investment and potentially earn your money, you could also lose it.
For this reason, the first rule of investing your money is to make sure that you never invest money that you can’t afford to lose. If you’re in debt, focus on eliminating your debt before you think about investing your money into other things.
Once your finances are secure enough that you’re comfortable with investing it, the next step is to always make sure you do your research before you put your money anywhere. The best option is to create a diverse portfolio, as this will provide you with a higher chance of a secure income.
Real estate is a particularly stable investment, as property tends to hold its value and it can provide a regular income. However, it isn’t as easy to get onto the property ladder as it once was. You can find other options, such as partial real estate investments.
You can also invest in stocks and bonds, small businesses, or even cryptocurrency. Follow the advice of experts, such as Jonathan Martin nfl who found a way to make Bitcoin investments more affordable, even if you don’t have a lot of money to invest.
Do your research, take your time, and never treat your investments as though you’re gambling.
This is the best way to secure your financial future.