In her latest article, Pria Masson discusses financial wellbeing and offers practical steps to build and grow your personal financial nest.
During my macroeconomic classes at university, we used to discuss the difference between expenditure or consumer-driven economies and savings-driven economies. In the former, government policies are aimed at providing ways for people to spend money such as lower tax rates and easier access to funding, so money will circulate in the economy and it will develop. On the other hand, savings-driven economies provide incentives to save, invest and spend prudently. This is done though tax incentives and higher returns on investments, with the idea that money saved is money earned and this will churn the economy.
Ironically, people deal with money just the same way, either being expenditure or savings driven at a core level. However, what they forget is that they themselves need to put their own system and policies together so that they are afloat financially. There is no government backing or protecting their personal financial decisions.
Here are some tips:
Know what you have and need
It is impossible to grow what you have, unless you know what you have and what you necessarily need. Without these two aspects you will have no point of reference. So, keep aside regular expenses. Add to this a reasonable buffer for unforeseen urgent needs. The remainder is your bag of twigs, and your nest can slowly be built.
Banks are a safe place to start
Start with the simplest places and ways to invest like banking and financial markets. In Bahrain, savings bank accounts give a near zero return on your money. So, these accounts are where one can place the buffer and the expenses that we talked about. However, for any investable money, you need to find avenues with higher rates of returns. Locally, fixed deposits give slightly higher rates of return (around 5 percent) depending on the amount and duration for which one is investing. Within the financial markets, if your risk appetite is higher, you can invest in crowd-funded projects.
Gold can be a good growth option
Outside of the financial markets, you could also invest in products like gold or silver whose prices also fluctuate and can give you a high return. Yes, your jewellery, and trainers and luxury bags, can be a part of your nest egg. They can appreciate, and they usually do.
What will you choose?
“Save for a rainy day” is a statement many of us would have grown up hearing about. However, it can be an uncomfortable and confusing concept. Some will experience today but save for tomorrow, some will experience today and assume there will be no rain, and others may live to save for tomorrow. The path one chooses however, is based on a number of factors.
The question is ultimately: would you be willing to sell your jewellery in a time of need? This question can be asked of any investment – is it something that you can dip into when times are difficult or are you going to be stressed if you must touch it? Think about why you get stressed using something that you created to save yourself from future stress. Invest in your financial wellbeing to be able to build and grow your financial nest egg so that it gives you wings – not stress.
Pria is an experienced business consultant who works as a business coach and advisor helping clients with their strategy, business plans and idea assessments. You can follow Pria at her Instagram handle @guide_my_idea and know about her experience at priamasson.com
