When you first begin thinking carefully about personal finance, everything you do seems to be about cleaning house. Before you learn the basic skills of money management, most people make regular mistakes and generally waste money that could be easily saved. It takes awhile to notice the inefficiencies and to train oneself to do better.
Once you get it, it’s hard to believe you lived any other way. And while you can live the rest of your life with a great deal of benefit from simple debt avoidance, budgeting, and saving, there is another level that you’ll want to graduate to if you want to keep improving your situation.
Saving isn’t the best way to prepare for the future. The main reason is that inflation of the dollar (or whatever your national currency) undermines your money’s buying power. In simple terms, your cash is constantly losing value, and there’s nothing you can do about it. The only way you can stay ahead of inflation is to take a risk and put your money to work. The old saying “you have to spend money to make money” is nowhere more true than in the world of personal finance.
Our future is uncertain. This is true for every person on the planet. And while we can’t control what is to come, we can control to a certain extent what our options will be when the future comes.
One of the early changes you should make to preserve your growing wealth and the security of the people who depend on your work and income is to get life insurance. The best life insurance companies can help draft an affordable policy that will cover your family’s expenses if you are no longer in the picture. While you won’t be able to enjoy the fruits of this expense, this is the best possible way to future-proof the hard work you’ve done up till this point.
From here, you’ll want to start investing. Investing puts your money at risk in some kind of venture, with the hope that you will derive income as the venture succeeds. There are many assets which can be purchased for the purpose of growing wealth faster than inflation. Some are very low-risk and slow-growing like government bonds. Others put money at much greater risk but present much more opportunity for growth.
You can invest in yourself with education in all its forms. You can invest in assets like stocks or real estate. You can invest in financial counsel to help maximize your current income and daily practice. All of these methods require you to put some money at risk, but they will also give you ample opportunity to grow your wealth rather than watch it lose its inherent value through simple saving.
Saving is better than excessive spending and debt, but once you’ve managed to control the way you use money, you’ll want to do something more than just save. Investing and insurance are great ways to preserve what you have, and watch it grow in the long term, for you and the people who matter most to you.