Tip #5: Investing

If you've read the previous post or tip#4 you probably noticed that it wasn't very positive. You may have noticed a few words enclosed in parenthesis. Savings will help you a lot especially during emergencies. But it can only go so far. The money you keep will always remain the same, no matter how long you keep it, a hundred will always be a hundred. Savings are good, of course, otherwise why would I recommend it. But you shouldn't get stuck at savings alone. Once you've made a solid budgeting plan, and have good self control, then its time you should move on to the next step in money management - INVESTING!

Let’s start by defining what investing is - here's my definition: Investing is giving something with the hope of that what you gave will grow into something of an ever greater value than what you initially gave. Let me give you a non-financial example. Think of a seed, lets say a mustard seed, you give the seed to the soil, in other words, you plant it. Then you fertilize the soil, water the plant, and in a few months you have a mustard tree which bears much more seed than you have planted in the first place. The same thing goes with investing. You place your money in a mutual-fund, in a business, real-estate, or in some stocks, and in a few years your money grows. If you read the previous statement again, you may notice that I did not mention banks - simply put banks offer very low interest rates, which we shall talk about in my future posts.

Unlike savings wherein your money stays put in one place and doesn't do anything, investing is making you're money move. By investing you make your money work for you. Investing is making your money active. But despite how profitable investments can be, it is in no way a replacement for savings, investments and savings serve their own unique purpose. Savings are generally for short-term goals or emergencies, while investments are for long-term goals and ultimately financial freedom (if done right).

Investing can be risky in a way, but as the popular saying goes, "no guts, no glory" which can also be stated "no risk, no gain." Often times with proper financial education, investment tools and strategies, the rewards of a good investment can be far greater than the risks. So take the time to learn about investments, the knowledge you gain from it will be priceless in shaping your financial future.