Spend, Save or Invest?

Once again, good night everyone!

This time, I come to discuss a subject that leaves a lot of people with their hair standing on end, some happy, some worried, many desperate: money – what to do with it?

This subject came to me when I started working in a company in Belo Horizonte. Until then I didn’t work, I just did an internship, so the most I could do was spend on my needs and save a little.

When I started working, I was immediately thinking about this: what to do with the leftover money (yes, I was single at the time – now I’m married – and money-saver – I still am 🙂 )?

Right away, I decided to start looking for sources of information that would educate me on this. My main sources were:

• Internet – I read a lot about a lot on the Internet. If you have access to it, but all you know how to do is access social media, oh my friend, you’re wasting a huge resource! If you are interested in this topic, you can search Google for keywords like “investment”, “finance”, “stocks”, “how to save”, etc. and you’ll be surprised how some of those pages can give you some good tips!
• Magazines – as my interest was strongly about investments, career and companies, the magazines that most interested me and gave me good ideas were Você S/A and Exame. I have not read Época – Negócios, despite being well indicated by other sources.
• Books – I started looking for books to read, I even got one, very good for those who are starting and want something simple, understandable and that shows everything in a very realistic perspective. “Investment Guide – Planning Savings, Assessing Risk”, is its name; and Lauro de Araújo Silva Neto, its author. As the title suggests, the book addresses the most diverse ways to capitalize on your income, whether you are someone starting in this and with few resources (like me!), or someone with more advanced capital and a bolder profile. Here’s the tip, then!

Well, after a bit of reading (and the bumps that life throws at us, and that’s how we learn why all the money that had been saved went down), I learned some basic rules:

• You only know where all your money is going if you keep tight control over everything you spend. Every bank statement that I withdraw is always kept for later reference, I write down (or at least I wrote down) everything I spend in order to be able to compare month by month what has increased or decreased and I try to predict how much I should earn and how much I should spend each month for a period of six months to one year.
• It is necessary to differentiate superfluous expenses from essential expenses, expenses that can and expenses that cannot wait. Having done that, I decided to update my spreadsheet in order to have these possible values ​​as well, a minimum of expenses that I would have in the month, the maximum of expenses and an average of expenses of the previous months. Yes, I know, that’s a lot of numbers, but the more data, the better your basis for knowing where your money is going. And remember: if an expense is essential and can’t wait, trying to save on it may not be a good idea. For example: you can’t save by not buying medicine for a disease, the most you can do is buy generic medicine (I do that, and the savings are huge, especially if your wife is pregnant and suddenly gets a urinary tract infection!).
• With what’s left, you can either save or invest. What is the difference between both? Basically, saving is when you keep your money in the bank, the bank can invest your money in something and in return it will give you part of the profits. There is no income tax on what you earn in savings. Yield is low, but it is always positive. Investing is when you “lend” your money to a company, which you use in some kind of project or restructuring, and you receive a return according to its profits. Income varies much more than savings (sometimes, they can have a negative result), they may present higher income, but income tax is levied on them. I advise you to read a specialized book about this (or wait for another time, when we will talk more about investments).
• You can invest your money in shares, that is, purchase of papers that guarantee you rights over a certain percentage of a certain company, but it is good to be aware, because the values ​​of the shares fluctuate a lot, thus being able to earn a lot, but also lose a lot!
• When you think about investing, it’s good to know how much risk you can take and how much you have to invest now and in the coming months, as this will determine your investor profile. You can be a more conservative investor, with low returns, but low risk (generally investing more in fixed-rate and fixed-income securities, savings, etc.), or a more daring investor, with a probability of high returns, but also higher risk of losing money rather than gaining it (generally by investing more in stocks).

Ready! These are some of the things that I studied and that have helped me a lot. It is true that during the period I worked I ended up investing nothing. Today, I still keep my savings in savings and plan to change, probably in 2009, my profile, starting to count on some actions. I haven’t done it yet because my life change (from single to married) could completely threaten the business as I might need the money. But if all goes well, next year I’ll have new plans in place and I’ll be able to do what I plan on savings. 🙂

Well, that’s it, I hope you all enjoyed our first text on the finance part!