The type of money you have determines the best way to invest it.
Money earned is a precious commodity. There are various ways people choose to spend their money, here we prioritize spending behaviors and explore what investment strategies might be appropriate for you.
- Essential Spending
This would include your mortgage (or rent), food and other household bills. Even Christmas, birthdays and a holiday can be included in this section. Ultimately, it encompasses the day to day essentials everyone spends money on. These cover life’s necessary expenditures and shouldn’t be used for any other spending. Unfortunately some people can only afford these expenses and have nothing left over at the end of each month to save or invest with.
- Insurance & Savings
This also an essential spend which sadly not everyone can afford. This covers your Health & Life Insurance, and savings or investments for education and retirement. If you are fortunate to have an income that exceeds your expenses, you are privileged to prepare for the future.- do it now, while you can! The money you save for the future is not put at risk but set aside to grow steadily over the years until needed. The insurances are crucial to take care of any unexpected circumstances that may put that future for you or your loved ones at risk.
- Play Money
This is the surplus money you have left only once the other essential items are taken care of. Very few people in the world are actually in this position. They can gamble the money away in risky ventures and activities without worrying if the money is lost. If they lose $200,000, it does not phase them as they know that they have taken care of the essential spending already. This is the group that can buy into one or two start up companies.
Some people like to talk about what might make a good investment, for example when the oil price crashes or COVID 19 lockdown causes Netflix subscriptions to spike. However, speculating and acting on speculation are two very different things. You should only act on speculation if you can afford to lose the money. Be wise with your finances and stick to the essential spending unless you can afford to shrug your shoulders and say, “Aww well. Maybe I’ll do better next time”.
All NEBA Financial Advisers are qualified to determine which kind of spending you are able to afford and identify suitable investments for you. We don’t speculate with your essential spending. We aim for steady long term growth through tried and tested methods whilst considering your eligibility for more elaborate methods.
