One of the most important decisions you’ll make in your life is whether to save or invest money. It can be a difficult decision, too! Many people think that investing their money will lead to better financial outcomes than saving it would, but this isn’t always true.
In this blog post, we will look at 6 factors that go into finding out which one is best for you and your situation.
Factor #01: Your Age
The first factor to consider is your age. If you’re young, you may want to save your money so that you have a cushion for when you eventually need it.
Young people often have more expenses in the early years of their lives, such as student loans and car payments. Investing can be a riskier choice for younger people because there is the possibility that they will need their money earlier than expected.
Older people may want to invest as much as possible in an effort to grow their nest egg and leave more money for their families upon death. Saving can be difficult when you’re older, too; this makes investing a more attractive option.
Factor #02: Your Income Level
Your income level is also a factor to consider when deciding whether to save or invest your money. If you make a lot of money, you may be able to afford to invest in riskier options and still come out ahead.
However, if you don’t make much money, it is better to be safe with your investments.
Factor #03: How Much You Make per Year
The amount of money you make in a year can also affect whether or not you’d benefit from investing your money. If you are already living within your means and don’t foresee an increase in earnings over the next few years, investing may not be the best option for you.
On the other hand, if you expect to make more money in the future, investing now could lead to bigger payouts down the road.
Factor #04: Your Debt Level
Your debt level is another important factor to consider when deciding whether or not to save or invest your money. If you have a lot of debt and few savings, it would be wise to pay off your debts as quickly as possible before considering investing.
Factor #05: The Amount You Have Saved Already
Another major factor that should influence your decision is the amount of money you’ve already saved for both short-term and long-term needs.
If you have a lot of money saved, investing it may not be the best option; you may be better off keeping your money in a savings account that offers a higher interest rate.
Factor #06: The Rate of Return on Your Investments
The final factor to consider is the rate of return on your investments. This number tells you how much money your investments will make you over a certain period of time, like one year.
If the rate is very high, then you may want to consider investing some or all of your savings; if it is low or negative, you might be better off just sticking with saving.
Do not save what is left after spending, but spend what is left after saving.
Warren Buffett
