At its most basic form, investment is when a person delays spending money now to not only place this money aside for another time but also to try to get this money to work to generate more money in some way.
Why is investing important? Well simply, none of us ever know what is ahead of us. We never know what financial emergencies may arise where we will need to access to money quickly.
Step 1: Understand what you spend your income on and never spend more than what you earn:
During consultations with clients, we have never spoken to before, we always need to get an idea of the potential client’s cash flow. How much money comes home after tax and how much of that is spent? Are there formal methods being used for savings and investments through debit order arrangements as an example?
Now, yes it could be that some people feel uncomfortable talking about these things, or even facing what they know to be true because then they would need to deal with a situation that is hard to deal with. It can also be said that some of us believe that we are in a situation where there is not much we can do to improve our financial position, we need to pay home loans, put food on the table, pay for transport, pay for school fees and so on. Now, this may be true but, you should be able to have an idea of what your financial position is to be able to then create a wealth creation plan.
Tracking what you spend vs what you earn is the first step to spending less than you earn.
Step 2: Put money away for another day!
When considering building an investment portfolio, start simply by having some money put away, where it can be easily accessible (a TFSA account is maybe a good idea) for these types of financial emergencies.
How much money should you have in such an account? That is a good question that truthfully only you can answer when you have a grasp on what you spend every month. There is no right or wrong answer here, its an amount that you are comfortable with.
The very wealthy people in the world always ensure that they spend less than what they earn and that they always have money to cover themselves for their short-term needs, this way they can then focus on the long-term goals.
Financial success starts with good saving habits. Our Financial Experts have been unpacking and providing practical advice on the best ways to preserve YOUR financial freedom. Contact our Financial Advisors to ensure that you are receiving Shariah-Compliant Finance advice.
Anglowealth is an Authorized Financial Service Provider (FSP Number: 46755)