Minimize Investment Risk By Building Up Your Savings

Directions Financial Solutions

It’s essential to have a solid cushion of savings before you start putting your money into an investment. Life is full of surprises. You don’t want to be caught in an emergency that leaves you desperate for cash when all your funds are tied up in bonds, CDs and stocks.

Saving money should always come before investing money. Your savings is the foundation you build your finance’s on because it is your savings that will provide you with the capital to feed your investments. If times get tough and you require cash, you’ll likely be selling out your investments at the worst possible time. That is not a recipe for getting rich.

Follow the 50/30/20 rule.

Financial advisers suggest that 50% of your income goes toward necessities, like your mortgage, transportation and food costs; 30% goes toward discretionary non-essentials, like dining out, paying for a top-tier cellphone plan and updating your wardrobe; and the last 20% goes toward savings. If you begin dividing each paycheck automatically, you’ll launch a habit of saving that will greatly enhance your financial life.

Put away three to six months of living expenses.

Now that you are in the habit of saving, the next sensible step is to put that money toward something substantial. Experts suggest the first step of saving is building up an account that is large enough to cover your living expenses for three to six months. This will tide you over in case there’s an unexpected event that keeps you from earning your regular salary. That may be an illness, your company downsizing or anything that leaves you suddenly unemployed.

Calculate exactly how much you need to live on each month and start saving. Then, even if the unthinkable happens, you won’t be up a creek without a paddle.

Directions members can save the way they want with several savings account and certificate options.  Check out your savings and certificate options here.

Build up a series of cash reserves – including an emergency fund.

Aside from living expenses, it’s important to have accessible cash for those unanticipated events, like a major household repair or a medical emergency.




One Comment on “Minimize Investment Risk By Building Up Your Savings”

  1. Nice one
    When you are saving money, you are mitigating risk but you are also compromising on the ratio of reward you may earn. Similarly, when you opt for investments, you may be subjected to higher risks but the rewards are also very high.

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