Increasing Your Rate of Savings to Invest More

Increasing Your Rate of Savings to Invest More

If you are thinking of investing, but don’t know how to save money to invest, then today we are going to discuss using the money you are already putting aside as savings as capital to earn more.

The rate of your savings is the key when talking about earning interest on your savings. For the first ten years after you start to invest, the rate at which you save will have the biggest impact on your returns. You can overcome any bad investment decisions that you make at first if the amount you save is hefty enough. 

“Try to save something while your salary is small; it’s impossible to save after you begin to earn more.” – Jack Benny

Does that mean you need to worry if you can’t afford to save too much right now? I don’t think so. The important thing to pay attention to, at this stage of your investments, is whether you can increase your savings rate over time. There are a few ways to do that. 

You can dedicate at least half of your raises to saving up for investments, or increase the rate over the period of five to six years, once your income begins increasing. Increasing your savings rate by as little as 5% every year for a period of ten years will result in sizable returns on investments. 

The returns you get in the early stages of investments will not have much impact on the final result. In this stage, you can afford to make a few mistakes and still come out on top as long as your savings rate is maintained.

“It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for.” – Robert Kiyosaki

Making small changes to increase the amount you save up requires a lot of meticulous planning. This is why I often suggest keeping a set time aside when you plan your finances. Being clear on what your financial goals are and understanding the incoming and outgoing money flow will help you create a tight budget.

You will learn to identify problem areas that you can work on and also find solutions to tackle those problem areas. This will give you a chance to save more by budgeting and running a tight ship with your expenses.

To save more, initially, you have to live far below your means so that you can maximize your savings rate and the part of your net income that you put toward your savings and investments.

Final Thoughts

People always will tell you that it takes money for you to make money. It is more or less the truth. When it comes to investments, the more money you can put toward it, the more chances you have of generating a great amount of passive income. The same is with businesses, the more you can put into its launch, the greater you have the odds of success. 

This being said, you cannot discount research, learnings, and your planning, but does play an important role. Learn to increase your rate of savings so that you can invest more.

Five Tips for College Students to Manage their Finances

tips for managing your money

College is over, the batch of 2020 have graduated and they start their journey into the real world into a world where money matters. Earning money is equivalent to happiness, in turn-key to surviving in this world. Hence one needs to be smart about their finances and where they invest their money. This sort of education is essential. Individuals need to learn how to manage their own money and learn to invest, as well.  

In schools and colleges, this sort of knowledge is given only to ones with a business background. But, the need for this sort of training is an essential tool for an individual in every field. Everyone needs to possess a certain necessary amount of knowledge about their taxes, finances, and investment. 

The first step towards investing and filing taxes is to understand your money and be accountable and responsible. To do so, one needs to learn to finance their cash personally. 

Five tips for managing your money

  1. Manage and formulate a Budget 

Once you start earning, your money is your responsibility. If you make $1000, and you know how much you need to pay for your rent, food, transportation, essential utilities, loans, insurance, entertainment, and luxury items, and after all this spending also remember you have to save some amount of money. Many ask what the point of saving is: it acts as a source of emergency money, and if you keep spending the entire $1000, you would not be able to afford things in the long run. 

  1.  Monitoring of Credit 

As a college student, you are in debt, and you need to save money to pay the loan. Hence you need to monitor your credit as the credit acts as a score sheet, if you do not pay your dues on time, then your score decreases, and you would not be liable for a loan. Hence restrict the usage of credit card if you aren’t able to clear your dues. 

  1. Keep a check on your Student Loan. 

Remember that you have an impending student loan that you need to clear. If you aren’t able to pay the mortgage for some reason, there are different options that you should know.

  1. The priority of your money 

Prioritize where your money goes, prioritize paying your loan over luxury items, or save for the future by not buying more than you need. Emergency saving is vital, as you prepare yourself for the worst outcomes. 

  1. Make Saving Fun 

All this seems like a party popper, but you can make this fun and keep yourself aware. For starters, you can start cooking your food, have days where you stay back and entertain yourself at home, look out for deals and lastly, focus on free entertainment such as hiking or public libraries. 

Final Thought 

It might all seem very intimidating, but as you start inculcating this habit, it will come naturally to you, and you will be able to be tension free. Make your financial goals clear to you, and it’s okay to make mistakes but also remember you are responsible for your money.