Financial Tools That Build Personal Wealth
Saving and Investing are two tools that can help build personal wealth
. Saving money is a result of a well-developed budget. When it comes to investing, there are risks that you need to consider and managed.
At most, people who are financially successful stretched their patience to risks. The return of investment is based on the amount of risks you allowed and managed. When the risks are great, the returns are also great. Conversely, when you are too tight on the risks, your expected returns are also less.
To build personal wealth, you have to define your financial goals, set time frames, study the risks involved in your financial and inflation. In setting your financial goals, you need to be specific. How much would you like to earn over a certain period? Your decision on where to invest should reflect your financial goals.
Time frames are important. You have to set a time limit within which you allow your investment to produce profits. Consider factors such as your need for money. If there are other goals you wish to pursue and may need financial support, you have to be particular with the amount of time you allocate for your investment, and the amount of risks you are willing to gamble.
The financial risks are evident to your financial resources. If your resources are not enough, you should be careful in managing the risks involved. Nonetheless, if you have more financial freedom, you have the liberty to allow greater risks.
Admittedly, although there are investments like the savings account that have no risks of default, there are certain inflation risks that will dominate the interest rate on the savings account. For you to earn a profit, the inflation must remain below the interest rate of your savings account.
The simplest way for you to build personal wealth is to have your own savings account at any financial institution. Experts recommend taking advantage of the compound interests with no risks at all. Now, relative to the banks, the interest rate varies as the type of saving accounts does.
There are three common types of savings account. General savings account allows you full access to your money at any time while it earns interest. You also have the liberty of transferring funds from one account to another while your savings enjoy an insurance of up to $100,000.
Money market savings account does not require payment of fees when you maintain a minimum balance. You earn interest, and may be allowed to write-off checks. This too has insurance of up to $100,000.
The certificate of deposit savings account earns interest during the terms. You can choose three months, six months and more. There are restrictions that underlie the terms of withdrawal.
To avoid penalties, you should refrain from making pre-mature withdrawal of the funds. Allow the money to mature and complete its terms. And when it does, you can enjoy both the principal and the interests. Your money is also insured up to $100,000.
by: Charles Godbout
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