RE: Poor Saving Attitude, My Biggest Problem
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I teach money management to teenagers, and I think my advice may help you as well. Strive for three "buckets" of money. Enough for your survival needs is your baseline. The second is short term savings. That's money in places that you could get to readily without financial penalty, for those life emergencies. The third is long term savings, where you build wealth for your future but also for things you shouldn't have to spend money on very often, like a house, a car, or similar. That's also a good place to save for planned-out personal rewards, like a trip. Within this this category, I would split up the investment risk.
Short term should be ~70% of excess money you take in, with 30% into long term. This may not be much, but will build, and you will be proud of your accomplishments!
Remember that you goal is to earn more than inflation and cost of living, sos that your minimum needs continue to be met while you build wealth for the future.
Good luck!
This is very, very helpful, I feel motivated to start the work right away. You are very good at teaching money management. I'll do just as you said, get three saving accounts and split my earnings like you suggested.. thanks so much for the input.
Sorry for replying late
No problem. The first and second locations can be the same, where you just keep track of which is which. With the third, you can usually earn more interest when you commit money that can be harder to access, or has penalties for accessing too soon, like losing the interest you've earned, but in turn will pay a higher interest rate.
In general, riskier investments should pay higher returns. It's up to you as to how much risk is acceptable. Generally, people take more risk earlier in life, when they'll have more time to recover over time.
An example: there were plenty of indicators that the American Stock Market was going to grow faster than normal this year. Choises: buy individual stocks, buy groups of stocks called funds, or buy a stock that returns the gain level achieved by the entire market.
The first has higher risk, but could reward the most. The second and then third are less risky of loss, but more stable. Over time, you'll learn to know what to look for, so your financial choices can become more proactive and less reactive. It's the latter, and not watching what's going on with your choices, that affects people the most.
You do you. Good luck.
I am often scared of Taking risks when it comes to investments but I'll give it a trial, I love the portion you said, " people take risk much earlier in life, when they will have more time to recover over time ".
It is tough for me to give generalized advice, because everyone's situation is different. Also, there are way too many people out there that exaggerate the wins. Find your comfort level of risk.
There are two solid truths, though, that will help anyone do better. The first is a plan that includes livable expenses, short term savings, and long term savings. The second is understanding what causes investments to rise and fall, so that you can be more proactive and less reactive.
The third is not changing how much you spend week-over-week just because your got some extra income or a raise. Keep your "needs" money as stable as possible, and grow that extra with better returns. The greatest gift you give yourself by growing wealth is choice. Choice to make life decisions on your own terms. Good luck.
Thank you so much sir, I feel like hugging you for this help. I'll go with the third, very seriously, I'll work on how I spend weekly but keep my needs available. This is very helpful.. thank you once again
Wow! This is very helpful and insightful! Glad I came across this comment, @bobbyb58 .