The first step of ‘paying oneself’ is very important. If you have taken the step, congratulate yourself. Is it enough to just start saving? You know the answer; the amount saves has to be invested, since the factor called inflation will make a big dent in the real value of your savings. This is very vital aspect in managing your Personal Finance.
Many people argue that they are getting interest on their savings. You will appreciate that the interest offered by the banks on savings accounts is virtually peanuts. There is no escapism from investing the amount that is saved. Some people don’t invest for the fear of losing money. This point has been adequately dealt with in our blog, ‘Risk Avoidance vs. Risk Management’. There is another class of people who do not invest because of inertia.
Of course, Financial Planning experts suggest keeping a reserve of six months’ expenses for as ‘Emergency Fund’. The person should invest any saving over and above that at the earliest. Here are a few important actions that will help:
- The time lag between saving and investment arises mainly when the person has not worked out his / her Financial Plan. As you are aware that for working out your Financial Plan, you need not have large income. When you start implementing your Financial Plan, it is very unlikely that you will experience such time lag.
- Discuss your progress or the lack of it in executing your Financial Plan with your Financial Mentor every month. One of the points to be discussed is whether you are investing as per your plan or not. This ‘investment’ of an hour every month can make a huge difference in your wealth creation.
- In case, you get more cash inflows than planned, bring this to the attention of your Financial Mentor and increase your investments as suggested by him. We have also discussed this in our blog, 'Utilising unexpected cash inflows'.
Of course, you can improve upon the above course of action, as you improve your Financial Intelligence. It is possible that some of you may have a few more ideas on this topic. I welcome your sharing.
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