Getting financial advice on where to invest your money is one thing, but don’t overlook the more simple matter of managing your savings! But, what is the best way to save money? ANDREW TALBOT of Expat Financial Planning highlights some key points to consider.
The first place to start is to clarify the differences between saving and investing. Saving is putting money aside, bit by bit, often to pay for something specific, like a holiday, a home deposit or to cover any emergencies that might crop up.
Saving usually involves putting your money into cash, such as in a savings account in a bank. As well as building up an emergency fund, saving can help you pay for big bills and for things you wouldn’t otherwise be able to afford out of your everyday money such as holidays or the deposit on a new home.
Investing, on the other hand, is taking some of your money and trying to make it grow by buying things you think will increase in value, such as stocks, property, or shares in an investment fund. To put it another way, investing involves committing money into an investment vehicle in the hope of making a financial gain
It’s important to have savings to help you deal with the unexpected. As financial planners, we recommend having enough to last for three to six months if you were to lose your main source of income. Investment is for the longer term and is suitable if you already have enough cash savings.
Keep in mind, too, that when it comes to saving for the long-term such as retirement, regular investing is often the only way to build up the amount you might want or need.
Goals & Objectives
You’ll also need to consider your goals and objectives – specifically if they are short, medium or long term.
- Short-term goals: things you plan to do within the next five years.
- Medium-term goals: things you plan to do within the next five to 10 years.
- Longer-term goals: things you won’t need money for for ten years or more.
Once you’ve identified your goals, an investment vehicle needs to be selected. You should pay attention to the costs of this and how the allocation of the investments fits in with your goals.
How to Automate Your Savings
The easiest way to get your savings working for you is to set things up so that you automatically add a bit each month. That way, you won’t have to remember to make the payment, and you won’t be tempted to skip a month. The best time to put money aside is just after you’ve been paid.
Set up a standing order to go out on payday, or just after it. This is also the best time to pay all those monthly bills. Set an automated monthly transfer from your current account into a separate savings account. Keep savings separate from your everyday money. This way, there’s less temptation to dip into them.
Consider having more than one savings account. If you are saving for several things, it can be handy to have several savings accounts. For example, you could have an account for emergency money and a separate account for holidays.
Your investment account is the same process, albeit with longer-term goals.
Book an appointment now.
Written in collaboration with Expat Financial Planning
For advice on savings, investments and other financial matters, call Andrew at 9824 1470.
Expat Financial Planning is part of Avrio Wealth Pte Ltd.