Hey Steemitians, Step 2&3 coming up now
Step 2: Saving Enough of It
You make enough money, you live pretty well, but you're not saving enough. What's wrong? There's only one reason why this occurs: Your wants exceed your budget. To develop a budget or to get your existing budget on track, try these steps:
•Track your spending for at least a month. You may want to use a financial software package to help you do this. Make sure you categorize your expenditures. Sometimes just being aware of how much you are spending will help you control your spending habits.
•Trim the fat. Break down your wants and needs. The need for food, shelter and clothing are obvious, but you also need to address less obvious needs. For instance, you may realize you're eating lunch at a restaurant every day. Bringing your own lunch to work two or more days a week will help you save money.
•Adjust according to your changing needs. As you go along, you probably will find that you've over- or under-budgeted a particular item and need to adjust your budget accordingly.
•Build your cushion – you never really know what's around the corner. You should aim to save around three to six months' worth of living expenses. This prepares you for financial setbacks, such as job loss or health problems. If saving this cushion seems daunting, start small
Step 3: Investing It Appropriately
You're making enough money and you're saving enough, but you're putting it all in conservative investments. That's fine, right? Wrong! If you want to build a sizable portfolio, you have to take on risk, which means you'll have to invest in equities. To begin, determine your return and risk objectives. Quantify all of the elements affecting your financial life including household income, your time horizon, tax considerations, cash flow/liquidity needs, and any other factors that are unique to you
•Next, determine the appropriate asset allocation for you. Most likely you will need to meet with a financial advisor unless you know enough to do this on your own. This allocation will be based on the investment policy statement you have devised. Your allocation will most likely include a mixture of cash, fixed income, equities and alternative investments.
•Risk-averse investors should keep in mind that portfolios need at least some equity exposure to protect against inflation. Also, younger investors can afford to allocate more of their portfolios to equities than older investors, as they have time on their side.
•Finally, diversify. Invest your equity and fixed-income exposures over a range of classes and styles. Do not try to time the market. When one style (e.g., large-cap growth) is underperforming the S&P 500, it is quite possible that another is outperforming. Diversification takes the timing element out of the game. A qualified investment advisor can help you develop a prudent diversification strategy.
Source: Investopedia
