Before moving on to the next financial area, let’s finish off with three key investing concepts.
Bull & Bear Markets
We speak of a bull market when share prices go up over a period of time, leading to more market activity and people wanting to buy more, thereby driving up the prices further. The opposite of a bull market is a bear market, during which prices generally go down, with many investors often wanting to offload their shares to avoid any further losses. Continue reading “Day 24 / 31 Investing Concepts”→
Now that we have covered the basics of investing and the stock market, you might still be wondering whether investing is the right move for you. This challenge starts with looking at reasons to invest, followed by some reasons to hold off investing, after which you should be able to make a more informed decision.
Why should you invest?
Let’s start with some of the main reasons that makes investing worthwhile to many.
Investing is an alternative to saving: by setting money aside people hope to grow it and with time build up a nice small capital.
Over long periods of time, the stock market generally goes up. Even if there is the occasional crash when stock prices go down, if you have the time and the patience to sit it out and wait, the market will recover again.
On average the markets go up by somewhere between 7-10% yearly. That is more than most yearly inflation rates;
The market average is also normally higher than interest rates offered on saving accounts;
Another fun advantage of investing: many people like to track their shares and see how they are doing with their investments.
Now that little by little you are improving your financial life, it is equally important to understand how people succeed and how people fail in this area. Why exactly do so many people still have debt or not enough pension or no financial plan for their future?
Ask anybody in your environment and a vast majority will say that they just do not have enough money to pay off their debt or to throw at their pension fund. But even when those same people get a pay rise, chances are they still won’t be using that money to pay off their debt, nor will they tuck it away and use it to invest in their pension. They will simply spend it on new things and without them even realizing it, their lifestyle will gradually inflate to a new level.Continue reading “Day 20 / 31 Calculate your Savings Rate”→
Now that you are getting ready to take full control of your finances and future goals, this is a good moment to discuss and share your financial planning with your partner – if you have not done so already.
Discussing money matters and making sure you have the same short-term and long-term goals in mind is essential to not only achieving your financial goals but also keeping your relationship healthy and happy. At the end of the day if you are trying to save, invest or grow your capital whilst your partner is more of the “let’s spend it all now” school, you likely both wind up frustrated with each other, meaning both your financial goals and your relationship happiness will take a hit and suffer sooner or later.Continue reading “Day 19 / 31 Discuss Finances with your Partner”→
One of the most fun parts of setting goals is seeing yourself getting closer to them with each step that you take. By tracking your progress, achieving financial excellence is not just a great end goal in itself, it will also become a fun journey with many smaller milestones to work towards to and keep track of along the way.
Although it is nearly impossible to predict how your pension will develop over time and how much pension schemes will change, especially if you are still many years, if not decades, away from your retirement, calculating your pension regularly and setting pension goals is a key habit to develop and establish if you do not want to be taken by surprise when you finally get to retirement age and start needing to rely on these payments to replace your regular income.
A pension is a fund into which the state, an organization and/ or an employee pay money, in order to finance retirement. This allows people to stop working when they are older, whilst still being able to have access to a monthly income or alternatively a lump sum of money that has been saved over the years.
Paying yourself first is about setting priorities for your finances and determining ways to always make sure you invest in your financial future. If you look at your list of monthly expenses for a moment try to find out where YOUR payment is.
Of course you are probably able to buy yourself a shelter over your head by paying off your mortgage or paying the rent, to buy food and clothes and financial security through your insurance, but whilst you are purchasing these items, somebody else is also benefiting from you buying these products through your payment. Sometimes the one person who does not seem to be getting paid in any way is YOU.Continue reading “Day 15 / 31 Pay yourself First”→