Invest to improve finances
If you’re willing to put in the work, with a little patience and a few crucial steps, you can improve your finances in 2018.
Investing may seem like work because we can’t connect the dots between what we value and the effort of saving and making our money work for us. To stay committed to improving your finances, consider what you truly value.
Perhaps it’s taking care of family, being secure or having a home. You may have other priorities that require more money than you may have in the future, or than you earn monthly. The alternative, debt, can leave you in a precarious financial position. Investing can help.
One way to get started is with a spending detox. This is about reining in unnecessary spending and swiping your card willy-nilly. We aren’t talking cold turkey, rather a gradual change in attitude to the way you spend.
As you go through this detox, think about your savings goals, your timeline to reach them and how much risk you’re willing to take on to earn investment returns.
Starting to save sooner rather than later can substantially improve your financial situation. Compounding makes your money work for you by earning returns today on the returns you earned yesterday.
If you start early and save consistently over long periods, less of your total amount saved will be from your contributions and more from growth. However, time also erodes the value of your money. To counter inflation you must earn investment returns. For example, if the inflation rate is 6% per year, your investments must grow by over 6% yearly before you achieve any real return.
If you’re uncertain how to get started, speak to a financial advisor. Look for independent advisors who aren’t tied to any products or providers.
Thandi Ngwane is head of strategic markets at Allan Gray.