“It’s not about how much you make, but how much you can keep from what you make”. To paraphrase businessman and author Robert Kiyosaki is relevant, especially in today’s economy.
No matter how big your salary is, it still represents one source of income. If something happens to that income, i.e. inflation, you get fired, etc., then your entire life will unravel.
For this reason, it remains of paramount importance to invest your money to diversify your financial portfolio. Your financial goals for 2025 should include the search for a proper investment opportunity.
Outline your goals beforehand
Before you chase after something, you first have to establish some clear and well-defined endpoint. Are your investment goals long or short-term? It is possible that you may want to cash out quickly or work on a longer-term strategy that will pay off in a decade.
Even the money flow can vary. Do you want to create a regular and predictable cash stream, or are you willing to benefit from a reinvestment strategy or price appreciation?
The answers to these questions depend on what is motivating you. Setting investment goals, as a general principle, should be calibrated with the end goal in mind.
Some people, after seeing the state of the economy, do not trust the government to deliver on their pension and healthcare. As a result, they are investing to get some retirement savings.
Others may wish to save up for a home purchase or fund their kid’s education. Whatever it is, the entire strategy has to be constructed around the immediacy of the goal.
Evaluate your current situation.
Now that you’ve established the goals that you want to reach, you need to review your current financial means. A good start is to calculate your net worth.
“Worth” takes into account not only your current cash flow but also your assets like land, houses, cars, etc. Also, in that calculation, you should factor in liabilities, like the amount of money that you owe. Be it mortgage payments, credit card debt, and so on.
This is good information to have at hand, even if you aren’t setting investment goals.
Then, you can look at the cash flow. This is a simpler calculation to make:
How much money is coming in per month, and how much is being spent? This will tell you the amount of capital that you can play around with.
Finally, a good piece of advice is to have a rainy-day fund. Investments are rarely designed to get you out of financial trouble, and they should not be seen as gambling opportunities.
Before you even think about investment, it is best to save up for a rainy-day fund. Cutting some expenses, paying off debt, and only then investing is the best practice.
Ideally, you should start your investment journey with 3-6 months of living expenses stashed away.
Gold IRAS
Gold IRAS have been growing in popularity lately due to the economic destabilization caused by the pandemic. It has become obvious to many people that if you can just print endless amounts of money, the currency will rapidly devalue.
This is what happened exactly, as skyrocketing inflation has hit countries all over the world. Inflation affects not only grocery prices but also your savings.
Inflation is often dubbed as the hidden tax because it affects all money in circulation, not just the money you pay taxes on. So, if someone stashed cash in their mattress for 20 years, hoping to save up for their retirement, that money has lost 20% of its value by the time they retire.
As a result, if the value of money cannot be relied upon, people are searching for something that is more stable. Of course, for tens of thousands of years, gold has been the go-to material that retains its value.
An IRA is nothing more than an individual retirement account that allows people to keep and store precious metals as an assurance of their future. Investing in gold IRAs has become very popular, as there has never been a time in human history when gold was deemed to be without value. You can always rely on it.
In terms of shape, people can buy bars, bullion, or coins. It really does not matter that much in the long run. The only difference is that coins, being smaller, are easier to purchase and accumulate over time.
Finally, let’s not undersell the importance of the fact that such investing is easy to understand. You don’t need to be a stockbroker to get into it, and the results are often predictable, manageable, and stable.
Low-risk vs high-risk
The discussion around personal finance goals should mostly revolve around risk.
Usually, like with all forms of betting, higher-risk bets pay out more. But that higher payout also comes with the possibility of wasting your money and not getting it back. High-risk investments like real estate, stocks, and even virtual coins have made many millionaires but also bankrupted countless others. These are considered short-term investment strategies.
Meanwhile, if you are patient enough to wait for a slow trickle of value, you can invest in bonds or index funds. These can potentially offer much lower returns on investment but are more reliable. They are considered long-term investment strategies.
Diversify your portfolio
Back in the Middle Ages, traders would invest in ships of cargo. However, if a single ship sank, it could potentially ruin the trader from a financial standpoint.
As a response, traders stopped buying entire ships and started to buy a percentage of each ship. So, if you own 10% of ten boats, and one of them sinks, you still have the other 90%.
This concept still holds up today, and this is why you need to diversify your investment portfolio. The more diverse, the lower the chances that it goes bottom up.
Of course, we live in the age of global recessions when the entire planetary economy goes belly-up on a regular basis. But still, it’s better to diversify as much as possible.
This not only means investing in separate assets but also in separate sectors of the industry and even in different countries or areas of the world.
Local legislation
Finally, financial planning for investments should always account for local legislation.
No matter what you do, the government wants a cut, and very few things are punished as hard as tax evasion. So please inform yourself about taxes and make the proper adjustments.
Investments are a versatile tool that can make or break your financial portfolio.
You can invest slowly into a stable stock in order to save up for retirement or buy a slow trickle of gold every month for the exact same reason.
Alternatively, you can go big or go home and select a high-risk, high-reward strategy that is sure to make you wealthier over a shorter period of time.
However, no matter what strategy you select, be sure that you account for all the relevant factors, such as your net worth, expenses, savings, and well-defined financial goals.
By Audrey Davis
Advertising feature with Amaya Media
