Which Is Your Best Source of Money? Investing, Saving or Earning?

Summary

• Which Is Your Best Source of Money? Not always what you think.
• You should maximize your income and minimize your expenses first.
• Maybe you should invest in yourself.
• Investing is an important stage – later.

What Do I Make with My 1,000 Dollars?

One of the most common questions of people – like small investors, savers, employees – used to be: “How should I invest my 500, or 1,000, 10,000, etc. dollars?” But I think the more adequate question for many of you is different. How can I increase my incomes, and decrease my expenses? That can be your best source of money.

Why? Look at the table below. If you have, for example, 1,000 dollars, you can’t have a decent monthly amount of interests that matter for you. With three percent interest annually, which is a relatively good value nowadays, in 2020, you get $30 a year. That means $2.5 a month. In most countries, that can buy almost nothing. A coffee or a beer in some cities.
(Of course, different in every country. You can substitute dollars with your national currency, and prices with typical ones in your region. Jut make your calculation.)

Saving Money Is Great

That doesn’t mean you don’t have to invest your 500, or 1,000, or 10,000 dollars. In many years, and with the power of compound interests (interests on interests), these amounts can also be very useful for you. What I’m telling you is that you better don’t bother very much about the interest rates and don’t take too many risks. (Unless you want to retrain yourself as a financial expert.)

In your situation, it is better to learn how to earn more and how to spend less. It is much more effective for you if you concentrate first on your incomes and expenses. An example. Let’s suppose you can save those $2.5 – every day. You drink every day a coffee or a beer less. Or, you drink it in your kitchen instead of the bar, coffee shop, fast-food chain, etc. If you can save $2.5 every day, you save approximately $75 a month.

30,000 Dollars Versus 1,000

Guess what… This saving is the same amount as if you had $30,000 in the bank, bearing interests of three percent annualized, instead of 1,000! Saving is much more important at this initial level than choosing the right investing vehicle. (With 2.5 USD a day, you save 900 dollars a year, + interests.)

But I said, “earn more and spend less”. How to earn more? Maybe you can build some “passive income”, as many financial blogs are claiming. But maybe not. Because building passive income is mostly some sort of hard entrepreneurship, and maybe this is not for you. Not everyone has the necessary skills, or the willingness to do that. Making your own business is hard and risky, as I explained it here.

Which Is My Interest, to Invest, Save or Earn Money?

The best tactic could be to combine the three methods, investing, saving and earning.

Continuing, read More on Agelessfinance.com

(Photo: Pixabay.com)