Money pinching & smart investments
Do not spend money you do not have! The prevalence of credit has complicated this simple advice, but every purchase is still a simple exchange of one thing for another, and those who have nothing to exchange cannot make a purchase.
As if in a bid to prove this point, our spending often increases to match our income, and we tend to forget that we may have higher expenses and lower incomes in the future.
Sometimes we act as though we have to spend all we earn right away or the money will go bad. It doesn't, of course. Yes, you may lose some buying power due to inflation or risky investments, and yes, you might not live long enough to spend all you save, but in most cases, the money you save now will benefit you in the future.
Companies spend a lot of time and money to convince us that their products are far superior to their competitors'. Sometimes we believe this, even when it isn't really true and we pay more for products without getting greater value.
Additionally, limited time discount opportunities (coupons, rebates, sales) can convince us that we are paying less for something of equal value when we could actually pay less for a product (or at a store) with no special discount.
On other occasions, these discounts do save us a good deal of money and means the simple task of paying less for the same thing can become complicated.
- You can improve your financial situation by spending less and earning more. A lot of people want to improve their finances without changing their habits, but unless you can convince your boss to give you a raise without adding to your workload, it is, for want of a better word, impossible.
You either have to change the way you spend (or don't spend) money or give up some leisure time to earn more. You can buy less, pay less for what you buy, work more, or find a higher-paying job, but something has to change, and it all boils down to spending less or earning more.
- "It is important that persons set aside money they earn for savings and investment. Individuals must try to live within their means. It is a discipline to establish, but when you invest and continue adding, in the long term you will acquire a sizeable portfolio," says Charles Ross, managing director of Sterling Asset Management Limited.
"Persons must start investing early. It is important not to withdraw interest from the investment but add the interest which will grow into a sizeable investment," adds Ross.
Persons making investments must take into consideration a number of factors. According to Ross, one of those factors is time.
- Time is important in determining the type of risk and the level of return anticipated.
He suggests that persons can invest in short-term instruments that include mutual funds or unit trusts. Long-term investments such as the stock market is another option.
- "Mutual funds build up resources and persons can get their money in a shorter period of time. Exchange traded funds that are much cheaper to purchase can also be utilised. These funds are much easier to trace and persons can track how the indices perform," he said.
- Buy low and sell high has always been the advice for success in the stock market. Thousands of individuals earn a living by trying to figure out how to follow that advice. There is always room for some elaboration and some disagreements over the best methods of improvement.
- "The stock market is an area that can earn a positive real return over a long period of time. If persons are thinking of investing in the stock market they can look at three to five years to realise any substantial returns," said Ross.
