The Truth About Savings and Financial Freedoms
Hey guys, I know the title might sound intriguing, but I assure you it's not clickbait! Many people believe that saving alone will make them millionaires or grant them financial freedom. However, savings must be combined with investments to achieve true financial freedom.
Recap on Savings
In my previous article on Savings, we discussed the two types of savings: emergency and project fund savings. Project fund savings is a percentage of your income used to fund future projects, such as college funding for your kids or retirement. Today, we'll explore how to use your project fund savings and what qualities to look for in a project.
Investments
Investments are what project funds are all about. It's placing a sum of money aside with expectations of making returns. Investments diversify your funds, earning certain percentages monthly, quarterly, or annually. As an entrepreneur, I prefer having at least one monthly investment in my portfolio. However, most investments give returns on an annual basis, providing a lump sum. To be a successful investor, you must be self-disciplined and play the long-term game.
Importance of Investing
Investing:
- Improves your income
- Enhances your mental health when done properly
- Considers the time value of money
- Advances your mental intelligence
Challenges Faced in Investing
- Psychological factors
- Poor investment appraisal
- Lack of financial education
- Poor project fund strategy, leading to insufficient funds for investment
Creating Your Investment Options (Portfolio)
Investing can be tricky. You must define what an asset is, find the asset you understand best, and develop a strategy to invest. There are various industries and numerous assets within each industry. Your job is to run feasibility reports on them.
Understanding Feasibility Reports
Feasibility reports estimate the likelihood of success and rate of return. They provide data on the investment and strategy, varying from different types of investments and strategies. Feasibility reports are a crucial element in financial education.
Conclusion
I hope you've learned something new or been reminded of something you already knew. Having multiple categories of investments in your portfolio is highly encouraged but not compulsory. Thank you for reading, and I look forward to seeing you in my next article!
