The Investor Diary Entry #30: April 17, 2023
If this is the question that a person is asking, then the person has already started the journey in the world of investment.
In today’s world and for many people income is already distributed into the expenses channels before it even arrives. To tackle the question of how to save money to invest, we need to take two main scenarios as assumptions for individual cases.
The first scenario is that someone has an income but is unable to save. The second scenario is for someone whose income is not enough to save money.
Before, we start with the scenarios, we need to flag a warning and talk about the concept of investable money.
Investable Money
Investable money is money that is suitable to be used or deployed in investment. Remember we are talking about investment and not trading.
Although when we talk about investable money there are money commonalities between investable money and tradable money, but just not to make any confusion we are reminding ourselves in this diary entry of these differences and that we are going to concentrate on investable money for investment.
In terms of time frames, when we talk about investment, we mean long term investment, this means years. Therefore, any money that is going to be used is money that we will not be needing at least for the next five years.
Do not use your emergency money, rent money, or any money that you might want to use within the coming five years.
If one is saving money for children’s college education or similar reasons, then this is a tricky question. One really needs to think hard about this one. We all know that in the world of investment or for that matter in any business, things can go wrong.
For me this is the same as investing for retirement. Many people do this, and many actually advise people to do it. I still say that things can go wrong. This is a decision that each one of us needs to think about and decide on our own.
We can listen to this or that expert, but at the end of the day it is our own decision, because experts will not be there when things go wrong. Therefore, we need contingency plans for when things go wrong. Does that mean it is better not to invest.
My personal opinion that I say to myself and not to any other person is use money that you do not need for anything, not even retirement, for the purpose of investing.
Another thing that I need to mention to myself, before I mention it to any other person, is that in my mind what I mean about investment in this entry is investing in the stock market. Sometime in the future, I will come here to read these entries, or someone might actually come and read the entries. Therefore, when I read this in the future, I need to know what I meant at the time of writing with investment. What type of investment was I talking about. Remember I am also using this diary for my online business; this means that I am writing this for people to see it, therefore, people reading this entry will need to know which investment type I am talking about. The Use of online business will come towards the end of this entry.
Yes, the way I was talking about saving and investment, I was thinking of investing in the stock market. Also the risks and investable money, I was also thinking about investing in the stock market. This is to make things clearer for any reader, whether it was me or any other person.
1st Scenario: One Has Enough Income
Many people who do have an income that is enough to make saving, yet they are either not in the habit of saving, or they don’t know how to use their savings in a way that would generate more income for them.
Back in 2006 I read a beautiful article in one of the well-known investment websites that explained a beautiful way for saving money. At the time this method was new, but today many people are talking about it, and it became a saving school of thought.
We all have bills to pay. Consider your saving as an expense. Meaning, bill yourself for your savings. In the same way that we make sure we have the house rent, utilities bills, even our morning coffee covered and put aside from our salaries or any other income that we receive. We put those things aside or at least we make sure that they are covered one way or the other.
Still, we do not treat our savings with the same urgency or motivation. I say motivation because this is how we treat the money that we spend every morning on our coffee. Well, not all of us, but many do that.
Consider your savings as one of your urgent bills, and set aside what you want to pay for yourself the moment you receive your income.
The mistake that many people who are already in the habit of saving, wait until the end of the month to see what remained of their income and consider this as their saving. Those who wait until the end of the month to save, will use that saving money for anything that comes their way in the mall, while window shopping, or even while browsing shopping sites.
Bill yourself and decide the amount that you want to bill yourself for your savings. Decide on the amount and decide on the frequency. By frequency, we mean; do you want to pay for your saving on daily, weekly, monthly or any other frequency that suits your situation.
Since 2021 I didn’t have any considerable income, but because of that particular situation, my partner and I decided that we will create a savings box and each will pitch a specific amount of money each month. You cannot believe the amount that we found a couple of years after that decision.
It is with that money that we started investing first in stocks, and now we have different investments from that savings box idea. This was done at a time when both of us didn’t have any income coming. We were both spending from the money that we earned from our previous years.
2nd Scenario: One Has No Income
This is a very difficult situation. I know because as I mentioned in the last paragraphs of the previous scenario, I was in that situation. Therefore, the first solution would be if you are spending money from your previous earnings, create a saving box and consider it as one of your expenses.
When you consider an amount as an expense, it means that you don’t depend on it for anything. It is money that has been spent and the assumption is that it is not coming back.
This is the same school of thought when you lend someone money. When you lend money to anyone, consider this money is gone and not coming back. This way you will not lose the friendship or any kind of relationship that you have with that person if that money was not paid back to you. This also means that you don’t lend money that you actually going to need.
The second solution is to try to find a way to create an income for yourself. Don’t wait for a job. Don’t misunderstand me. I didn’t say don’t look for a job, I said don’t wait for a job. Keep applying and keep searching, but don’t keep waiting and spending your earned money.
Try to come up with an idea that can create an income for you, any kind of income is good income. Any income is better than no income at all.
I am a consultant for civil society organizations who is not good in creating a good network. Being a freelance consultant means that one needs to be great at making connections and creating a network that will always be a source of new contracts. Well, I am not putting a lot of effort on that front.
One of the reasons is that after many years of being exposed to the world of civil society organizations, I stopped believing in their effectiveness in creating change. Well, this is a topic for another platform.
I was introduced to the world of online business in 2006. Yes, again in 2006. In that year I was looking for ways to create a separate income as the risks were high at that time in the company I was working with.
In those years the tools were scarce, and one needed a lot of technical knowledge, so at that time it didn’t work out although the website that I created kept running for years. I tried different models and different ways to make it work, but it didn’t.
Last year I found a platform that gives all the tools including the website; in addition, to a step by step training which I was able to try for free and without any time limitation.
This blog is made using the steps that I am learning from them. If you want to know more about them, I wrote more about this online business platform in this article.
Conclusion
Normally life will give you challenges that you are able to handle. It is up to you to handle it or not. In this entry we talked about possible solutions to the issue of savings.
Creating savings is crucial, but the most important thing is how to make those savings create income or more income for you.
In a strategy game your saved money is your exploring troops. You send those troops to bring you more money, resources, alliances…etc. Mentioning games, you can also use the Cashflow game by Robert Kiyosaki to make your mental shift of how to handle money while in the rat race.
In brief, if you can save but you are not currently saving, then get into the habit of saving. If you don’t have enough income to save, then create more income to be able to save.
The Investor
Monday 17 April 2023
About The Author
I started to look into individual stocks in January 2022. I created this diary initially for myself to track my investing progress, and second as a place that I can share my ideas publicly hoping that others will share their ideas and learn from each other, and lastly as an online business where some links that I share are affiliate links, and if anybody bought anything by clicking those links I will get a commission based on that successful sale, which of course will not affect the price that you are buying the product or service at.
For a more detailed information on my affiliate disclosure please refer to the Full Affiliate Disclosure page, and if you are interested in building your own online business you can check this post here.
Furthermore, this site is in no way or form is giving any financial or investing advice, nor it is encouraging or discouraging people to buy or sell any financial instrument. This is a personal diary in which I track my own progress and share for informational, educational and entertainment purposes.