When people talk about their future and financial planning, every person has their own unique and individual opinion. Some will tell you that they have invested heavily in their pension and IRA’s for when they are older, some may talk about their spread betting and investing activity in the markets, while others may enlighten you on their property portfolios and the benefit of long term savings accounts.
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Ways to Effectively Save for the Future
The true reality of it all is that it depends on your appetite for risk and your thirst for reward. A young saver or investor with a penchant for danger may choose to spread bet on the markets while someone who is a bit older and mindful of retirement may opt for less uncertain futures and favour savings accounts and increased pension contributions.
No matter how one chooses to invest their money, the only guarantee is that being proactive in deciding is the best route forwards. Whereas many of us are guilty of turning a blind eye to a financial opportunity before, or have chosen to dream about lottery wins and inheritances falling from the sky, the most successful way to protect and increase our money is to take the matter into our own hands. So rather than drivel on about the benefits of doing it, we thought we’d offer you a few of the most common solutions for you to choose from, depending on your appetite for risk and reward.
LOW RISK OPTIONS:
The standard Banks and Savings Accounts: While your finances are protected up to $250,000 per institution you have an account with, the interest rates are exceptionally low thanks to the FED’s decision to hike them so slowly, meaning that while this is a low-risk choice, it is also a low-yield opportunity.
A Roth IRA: Effectively this is a simple and tax-efficient savings mechanism for those who are on a standard salary and are likely to have a higher than expected retirement tax rate when they get older. When these are run correctly, they can prove to be tax-free and carry little to no inherent risk for your savings.
The 401K: For any of you still in employment, you should be able to invest a small portion of your monthly salary into a pension account tax-free. While the money is irretrievable for you in the short term, it can offer peace of mind for your future with no concerns.
MEDIUM RISK APPROACHES:
Investing in Property: If you fancy yourself as a property-buff or have a sizeable amount of money available for investment, real estate could be a great solution for you. While house and apartment prices may not seem as opportune as they once were, they can prove solid investments when you account for price increases and rental incomes. Just remember that you need to budget for rental tax and any mortgage rates that you may be looking to take on.
Managed Funds and Shares: For many who want to take a leap into the stock market but don’t feel they have the knowledge to just pick a broker themselves, this is a safer bet. While all investments carry a degree of risk, asking to see a companies’ previous years performances to benchmark your likely return on investment is perfectly reasonable and could help you gauge just what sort of ROI you could be looking at if their investment success stays on track. Just remember that managed accounts do carry fees, so be sure to factor these in first.
HIGH RISK SELECTIONS:
Foreign Property and Land: While property itself may be classed as a lower risk investment, international property can offer quite the reward. Take for example the current market position of the Dollar against the Pound and the UK housing market becomes a more attractive solution, but remember that managing foreign property may mean using an agent or frequent trips over and therefore offers an increased level of risk.
There will also be property tax and be sure to keep on top of currency changes that may affect your fees and eventual returns.
Self-Managed Shares and Investments: Typically associated with a higher-risk position, spread betting using a broker such as City Index allows you the freedom to enter and exit the market at your own discretion.
Remember that there is a danger that you can lose more than you intended to invest, but following guides and using free facilities like stop losses and indicators can help you minimise your risk and maximise your potential returns.
While all of the above choices can help you increase your ‘money pot’, they are best reviewed with a financial planner or with your own personal futures in mind. The ability to balance your portfolio, with a few of the above selections blended together, is also a great way to build a successful future.
If you have any other tips and advice on ways to best plan for your financial future, please comment below and be sure to check out our other great articles including our advice on the future of marketing. 🙂