For every working mom, putting some money aside for the rainy days seems like an obvious and reasonable thing to do. You may be having doubts about whether it’s enough to save, or should you try investing as well, in order to reach the sum you need. Still, when considering the retirement plans, we need to think about more than just the amount of money we end up with. We need to be prepared for various scenarios, including wars or periods of recession, and we need to keep in mind the fact that money loses value over time.
Fortunately, there are all kinds of things you can do in order to improve the safety of your funds and investments. Here are some of the ways to at least reduce the damage the time can cause on your finances if you cannot avoid it altogether.
1. Understand the danger
First things first – you need to understand one of the most important dangers to your financial future – inflation. In general, this word refers to the fact that money tends to lose value. If this seems unclear, consider the following: in the USA, the average price for a new home in June 1998 was about $175,900. In June 2018, the average price was $271,931. The house is just as affordable as it was in 1998 – its value stays more or less the same, unless there has been an incredible surge in population, which would disrupt the supply and demand ratio, and in which case the price would be much higher.
So, if the house keeps its value, that means that the money losses it. That means that prices are higher than they were 20 years ago, but the salaries are higher too, so the general payment capacity stays the same. Therefore, inflation does not pose a danger for your day-to-day finances. Why are we discussing it, then?
Well, while inflation does not influence your daily life, it is a huge looming cloud over your savings. If today you manage to save a certain amount of money you feel is enough to get through your retirement comfortably, tomorrow you may find that it is simply not enough. Even though today you can buy plenty with a sum of, say, $1 million, in twenty years you won’t be able to buy nearly as much. So, this is the true (and very sneaky) danger to your retirement plans – a part of the money you work hard for today will go to waste if you don’t use it. However, if you do use it, it won’t be there when you need it in the future. So, what can you do?
2. Investing vs. saving
Once you start considering your future, you need to decide which of the two ways you want to go – saving or investing. Well, the truth is that all you need to do is adapt your style to the purpose. What does that mean, you may ask? It’s simple; if you’re looking for long-term stability, go for investment or some combination of the two. Investing your money will likely prevent the problems that come with inflation – you’ll be left with the same or higher value than the one you start with.
Still, if you need a certain sum for a specific goal – such as buying a car or going on a really fancy holiday trip – you should save. Saving is generally faster than investment, so it’s a good option for all short-term goals you have.
Finally, if you need the money in a really short time, and you still have no savings to dip in, your best option is probably unsecured personal loans. With these, you don’t need any kind of collateral (hence the unsecured part), which puts you in a less risky position than regular loans. It doesn’t mean that you won’t need to pay it back, of course – you can still be prosecuted if you neglect your duties. While loans are technically neither investments nor saving, they can still get you out of a tight stop, or enable you to invest in a business you feel strongly about.
3. Play it safe
If your goal is to get rich, you should probably take a risk when you spot an opportunity. However, it’s always wiser to take the safe approach – you’re less likely to get filthy rich, but you’re also less likely to lose your money. If it’s a stable, safe retirement you’re after, playing it safe is the way to go. Don’t put all your eggs in one basket, and try to diversify your investments as much as possible. There are always safer and less safe options out there, so here some of the former. Another great venture is that we buy junk cars. So if you have a car that is junk, why not make some money off of it?
4. Dividend-paying stocks
Dividend-paying stocks are generally considered to be a safer investment than non-dividend stocks. They bring you both long-term and short-term gain, provided you choose a reliable company. If this is the way you want to go, make sure to pick a company with a good record rather than one which is currently doing well but has a shady history.
5. Mutual funds
Mutual funds are a good option if you are unsure or inexperienced. You pool your money with other investors, and then a professional money manager decides on the best course of action. It lifts a bit of pressure of your back, and as long as you find a reliable fund, you should be able to gain profit while avoiding unnecessary risks.
6. Consumer staples
If you feel that your country’s going through a particularly unstable period, consider investing in consumer staples – goods that are necessary for everyday life (food, basic household supplies). Because there is a constant need for them, people tend to buy them even in times of crisis. That means that consumer staples generate a constant income, and they are the best thing to invest in during unpredictable times.
Even though sometimes it may seem like you’re fighting a losing battle, there are some simple things you can do in order to ensure your money doesn’t go to waste. Invest wisely, and you’ll get to that early retirement even sooner than you’ve thought.
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