My Saving Series articles have focused on how to reduce your spending, and why you should do so. Primarily, it directly increases the amount of money that you save. Following this path for long enough gives you the means to create a path to financial investing.
Being able to deploy your money to investments allows you to directly increase your income and improve your circumstances. It is one of the most powerful financial tools available to you, and everything you’ve done up until this point has led to this.
It is time for your efforts in reducing your expenses and increasing your savings to be rewarded.
Welcome to the Saving Series – my thoughts on how careful examination of your finances can lead to outcomes that you never thought possible.
Perhaps you’ve struggled to pay down debt or enjoyed spending money as a hobby and decided to cut back. Your efforts to save were not in vain.
Through undoing past mistakes, building a healthier relationship with spending money, and ensuring your life is run at a profit, you have created a path to financial investing.
The Path to Financial Investing
Previous entries in the Saving Series outlined how we got here. We focused on meeting our basic needs and building the skills necessary to avoid overconsumption. Modern society has many means of separating citizens from their money, from advertising campaigns to making it difficult to discern value for money.
I’ve written a lot on this blog about why it’s important to reduce your spending. While increasing your income is essential for financial success in the long term, it only solves immediate problems in the most dire circumstances. The focus becomes reducing expenses and finding creative ways to solve your problems. This in turn gives you the ability to turn a profit and potentially unlock new skills that may earn you an income in the future.
The act of reducing your spending forces you to analyse what truly matters to you. This shouldn’t be seen as suffering without the things you want. Rather, it’s about making intentional choices to save money and forego the things that don’t matter as much.
To many people struggling with saving, responsibility must be taken and sacrifices must be made. The purpose of this analysis is to ensure that you don’t remove the things that truly make you happy unless you absolutely have to.
The savings you create then go on to give you security and hope for the future. There will be misfortune in the future, and no amount of saving will protect us from that. But if you have a savings buffer to protect you in the face of job loss, illness, or other misfortunes, you have the means to protect yourself and your family.
Saving frees you from the debt trap and gives you the means to begin investing in your future.
It All Led Up To This
Everything you’ve done up until this point has led to this moment. You’ve reduced consumption without feeling like you’re giving up the things you enjoy. You’ve built self-reliance, which makes you more proficient in every aspect of your life. You understand how much money you have coming in and where that money goes. And you use the money you’ve saved to build stability and security into your life.
You see clearly how the world tried everything in its power to stop you from succeeding—and how it failed.
You stand triumphant on top of a mountain you climbed in spite of the challenges you faced. Others will make it to the top of the mountain too, some faster and some slower than you. Some got to take the cable car up and didn’t need to climb at all. It doesn’t matter. None of that matters.
The only thing that matters is that you are here, and you now have the ability to consider alternative means of using your money.
Congratulate Yourself
Saving money is difficult. There are many people who struggle to save anything, and the fact that you’ve saved enough to give yourself the means to invest is worth celebrating.
So congratulations to you! You, who may have struggled with hardships throughout your life; who may have bounced back from serious misfortunes; who has had to work hard in the face of rising expenses in every category. Those of you who never thought this was possible.
If you find yourself in this situation, one of stability and security where you now feel like there’s a way forward, celebrate it. Be proud of what you’ve accomplished.
Don’t let anyone take that away from you.
Financial Investing
The path to financial investing is difficult. Getting to a point where you have the means to divert your profits away from maintaining stability in your life and instead on improving your circumstances doesn’t happen easily. Now that you’re here, you have some interesting decisions to make.
I’ve written about how to approach investing in my Investing Series. While investing is about more than just where you put your money, there’s a massive financial component to investing too. Thinking about how you want to use your money is just as important as having the money to use in the first place. Saving money and knowing how to save money is therefore the bedrock of any solid investing foundation.
Investment options vary wildly. You may choose to invest the money into assets that generate an income for you. You may instead choose to invest your money into knowledge that allows you to increase the value of your time and therefore your income.
Your investment goals will be different from others’ goals. And your risk appetite for the options you choose will be different too – even to those in a similar situation to you. Take your time and deploy your money wisely in a way that works best for you.
A Reminder
As our focus changes from saving to investing, I remind you that I do not give financial advice. I will never tell you what investments to buy, when to sell, or anything else that directly influences you to make a financial decision. I’ve written more about this here.
Do you have the money to invest? It’s important that you consider how and by whom you are influenced when making those decisions. Everyone cares about your money, but only you care about your financial well-being.
Thankfully, by following the strategies throughout the savings series, you’ve developed the skill set to maintain your financial well-being. But it’s your responsibility to ensure you do it.
Traits of Investors
Up until this point, your focus has been on reducing expenses and finding ways to save money. This has likely happened slowly over time, following gradual changes to your lifestyle and spending habits.
The reason why you’ve built a saving habit first is to ensure that once you begin investing, you don’t fall victim to get-rich-quick schemes, scams, or bad advice.
You’ve built the mindset of creating wealth slowly over time. In doing so, you have inadvertently developed within yourself traits that all types of investors will benefit from.
Patience
To succeed as an investor, you need patience. Patience is what stops you from diving into an investment headfirst without fully understanding it.
As you’re likely taking your first steps into investing after improving your saving habits, it’s especially important that you don’t jump in too quickly before you understand what you’re doing.
Take the time and do research on what investing means to you, as well as how to invest. Then, decide which types of investments you believe will suit your risk appetite and time horizon.
Investing is a long game, one that you’ll likely be playing for the rest of your life. It stands to reason that you shouldn’t be chasing quick highs and fast ways to turn around money. Find investments that serve at least one of these three goals, that also fall within your risk appetite:
- Investments that preserve your wealth.
- Investments that improve your ability to earn an income.
- Investments that have a reasonably predictable history of increasing in value over the long term.
Stability
The steps you have taken thus far have been done so to create stability in your life. This stability, or financial security, is what gives you the means to invest.
Now that you have the ability to invest, this doesn’t mean that the reins come off. Far from it.
Ideally, you’ve been building a lifestyle that’s sustainable. It won’t serve you to save as much as possible to make investing an option if throughout that time it’s purely making you miserable. It’s possible that you’ve made it to this stage by aggressively sacrificing aspects of your life that you wanted to maintain. If you’re trying to fund a major goal, like a home deposit, sometimes this is worthwhile – and necessary – in the short term.
Whatever the case may be, it’s important to make sure that the life you’re living is stable. Don’t burn yourself out in order to achieve the outcomes you desire, unless you know that your sacrifice will be worth it.
Continue living a stable life, save what you can, and create a plan for using those savings for good in your future.
Consistency
When investing your money, especially in assets that fluctuate in value often, it’s easy to think that you can time the market by investing your money at a particular time. This strategy is short-sighted and dangerous to all but the most experienced investors, and even they can make mistakes.
There’s merit to strategies of continually investing your money into the market regardless of the performance of that market.
Is this price of the investment rising? Great. I might be buying less today, but the value of my investment portfolio is going up. This is a win.
Are asset prices are going down? Cool, I guess today’s buy is at a discounted price. Still winning.
Many of these swings in price don’t matter in the long run, and history has shown that the more that you continuously invest regardless of peaks or troughs in the market, the more likely it is that your financial plan will succeed.
If you make these investments automatically (there are a few platforms that will do this for you), you can even distance yourself from the fluctuations in the market. Once you’ve defined your strategy, you can deposit money into your investing account and invest it on auto-pilot.
The important thing is investing consistently over time (especially early on), to take advantage of compound interest as much as you can.
Courage
Investing requires bravery. Your financial habits up until this point have been about preserving your wealth. Now, the pendulum shifts towards utilizing your money to create a better life for yourself. Depending on how you use your money, you may find that the value of the things you buy fluctuates wildly during the time you own them. This is the case for many investments, such as shares and cryptocurrencies. But in order to enjoy the upsides of the money you invest increasing in value, you have to be able to weather the downsides. You may even need to be prepared to lose the entire value of your investment.
The purpose of investing is to triumph over entropy and inflation. These two forces will continue to erode your financial, physical, and spiritual well-being if not managed carefully. You must be brave and continue moving forward in order to build a better life for yourself.
Graduate From Saver to Investor
With your needs met, a cash buffer to secure yourself, and the means to use excess capital to invest, it’s finally time to graduate from a saver to an investor. You’ve created a path to financial investing. How you move forward from here is up to you.
As I’ve mentioned, you can invest in increasing your skill set through education to give yourself the possibility of a higher income. You may choose to invest actively or passively depending on your risk tolerance.
However you find yourself investing this money, know that it will be working for you to earn you an income.
If invested wisely, it may pay dividends for the rest of your life.
Closing
If you’ve followed every step that I followed in this philosophy, then you’ve likely rewired how you think about money. What comes naturally to some people may be difficult for others, and there’s no shame in finding a challenge in learning how to save.
I’ve always been frugally minded, but this isn’t the case for everyone. You may think that some of my philosophies are extreme in nature, and that’s okay. As with everything in life, moderation is important. There may be some aspects of my philosophy that you don’t agree with, and that’s also okay. Take what you find valuable and use it to create your own philosophy that guides you in your own life.
There are a few more articles in the Saving Series I have yet to finish. I’ve discussed “how” and “why” we need to save. The final group of articles cover “what” – specifically, what challenges we need to overcome in order to save successfully.
Saving is one part of the trinity of concepts in my personal philosophy. This series has articulated why I believe saving is an essential part of modern life. Saving is the starting point of the manifestation spiral – the concept through which I believe we manifest our most powerful selves. Learning how to save and allocate your money wisely is the first step on this journey. I’ll talk more about the manifestation spiral and the way that I believe saving, investing, and choosing work you love interact with it.
For now though, celebrate your victories. Conquering your savings goals and the threats that oppose them is no easy feat.
Continue to practice and build upon your saving habits as you begin your investment journey.
The next step of your journey awaits.
Thank you for reading.
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