Save now and invest later Keep the two ideas separate By Mo2 on March 2nd, 2008

I know it sounds like a cheesy commerical or something but it's true. You should keep saving and investing completely separate. When you’re working full time there really is no time to do anything but work, go home, eat and sleep. At least that’s how it seems sometimes. I always tell people that no matter how busy you are, you have time, it’s simply about how you look at things. When you look at a glass with water filled halfway, do you see a glass that is half empty or half full?

Saving vs. Investing
Saving money is basically putting away money for future use, whatever that may be. Of course, there is saving money by spending less on items that you buy and this should directly reflect on what you put away. It takes effort to put money away since we all have so many expenses in our daily lives. We always have more “wants” than “needs” in life. We all have our dreams and always think about the items that we really want to buy but for obvious reasons we hold ourselves back because if you’re like me, you don’t want to doom yourself in financial failure.

Putting money away should be a must in your life. If you are getting a paycheque, you should automatically put away money into a savings account and never touch that account unless you are investing it. Read my automatic savings article and compound interest article for more reasons as to why.

Investing your money is looking for a return with a certain degree of risk. Government issued investments such as treasury bills and government bonds have virtually no risk but have minimal return. You can increase your risk by buying debt securities or even stocks, which have the potential for greater return. Overall you should have a good mixture of it all so that you can reap the benefits when a certain market is performing well.

Keeping the two ideas separate
A lot of people think about saving and investing as the same thing. In Canada we just had our Registered Retirement Savings Plan (RRSP) deadline pass on February 29th . The RRSP is to us what the IRA is to the citizens in the US. When I talked to people about contributing to their RRSP a response I often received was, “The markets are plummeting, why would I want to invest now?”

Responses like this make me cringe since it tells me that the person hasn’t put much thought into putting money away. Just because you put money away, whether if it is a savings account or an RRSP (just to park it), doesn’t mean you have to invest it in the stock market right away if at all.

Once you have enough funds put away then you can start thinking about investing it. Investing isn’t easy either but there’s no need to push yourself into putting everything into a penny stock that your uncle Jim has told you about. Put your money away and start learning about investment vehicles little by little. It’s a long process but the more financial knowledge you have the more success your will have.

Investing is an Art
Every person has a different portfolio because we all have different personalities. How we are as a person reflects in our portfolio because it reflects our risk profile. If you are someone that is more conservative then you will have more cash and fixed income securities than equities (stocks).

I’m someone that can take on more risk because I’ve been studying investing and trading for years and I’m more comfortable with taking risks. But in the beginning I thought savings accounts were the only way to go. That’s because I didn’t know what investments were available. I still don’t fully understand a lot of the investments out there since in the day and age we live in there are investments that are always being added.

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>> Page 2 Save now and Invest later

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