Most Americans think that savings is what you’re left with once you have taken out your expenses from your income. This is the standard definition of savings. However, if you want to save enough money so you can have enough cash to invest in stocks and bonds, you have to turn this definition on its head.
Instead of looking at savings as what’s left over after taking out your expenses, you should define your expenses as what’s left over after taking out your savings. In other words, pay yourself first. The reality is that you won’t have any investment capital if you can’t master saving. I hate to break it to you, but it takes money to make money. You can’t get something out of nothing. You need some investment capital and that’s not going to happen if you don’t have any savings. Moreover, simply saving money is not enough. You have to invest for maximum return. You have to constantly weigh your different options and figure out your risk appetite. Once you get all this information, pick the investment vehicle that would yield the highest return.
This is the systematic and strategic way for investment. Too many Americans look at investment as something that they will eventually get around to doing. Not surprisingly, too many people have a tough time making ends meet, much less making their money grow. It really is too bad. By simply changing your definition of savings, you can go quite a long way in laying the groundwork for a sound financial future. It all depends on the decisions you make today. Start making the right ones.