Money Matters: The Absolute Beginner’s Guide to Saving and Investing

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Money is one of the biggest determinants for almost everything relating to quality of life. Studies have shown that having money and wealth play a huge role in how happy you feel, your sense of emotional and physical security, your mental health, and your physical health too.

Recent studies have shown that many Aussies don’t have any kind of savings at all, with 20% having less than $1000 in the bank. Building wealth is one of those things that is best done 20 years ago, but starting now is a better time than not starting at all.

If you’re absolutely new to the concept of saving and investing, and phrases like ‘compound interest’ and ‘salary sacrifice’ make your head spin, we’ve put together this simple guide to piecing it all out.

To that end, we’ve enlisted the help of Instagram financial influencer Queenie Tan. She’s behind the account Invest With Queenie, where she has documented her journey from clueless to cashed-up and digs into all of the big financial and investing questions that you might have as a beginner.

Here’s what she had to say about starting out as a total newbie to saving, investing, and building your wealth.

Why Is Investing and Saving So Important?

It almost goes without saying, but saving and investing is really important. Queenie notes that the pandemic has shown us financial stability will not always be there and having the ability to weather such storms is vital.

However, the two terms are not interchangeable. Saving means putting a portion of your income into an account and adding to it when you can. Investing is using that money to buy things like stocks and shares which will then (hopefully) increase in value.

While the former seems like the safer option, Queenie says it’s wise to do both.

“Inflation is at, a pretty high point right now. Inflation hit 7% in the US recently, which is really, really high,” she said.

This means that, “over time, our money buys less.”

“$10,000 40 years ago bought a lot more than it does today because the price of things keeps on rising. That’s one of the reasons why people look to get a better return on their money rather than putting it in a savings account.

“The interest rates on savings accounts aren’t very high at the moment. At best, you could get 2% on a high-interest savings account, but that is really not enough to keep up with inflation. If you want to want your money to be worth more in the future, or if you do want your savings to keep up with inflation, investing is a way that people can do that”.

What Are the Risks of Investing?

One of the biggest risks of investing is that you could lose your money. Past performance of a company or an index does not mean that it will do well in the future and that you are guaranteed to make money.

However, the famous phrase of celebrity investor Warren Buffet that “time in the market is more important than timing the market” rings true here.

The stock market “does have turbulent years,” Queenie says, “as we can see with the stock market this year”.

“They do go through periods of really high growth and then periods where it does start to slow down, but over the long term… assets do tend to rise.”

This is why being “in” the market for a long time is important. As Queenie explains, most financial institutions consider long-term investing as a period of at least seven years or more. Keeping your money in during the ups and downs is likely to see a net increase over that longer period.

One of the worst things you can do, and this is something new investors are often prone to, is to panic sell your investments once you start to see your money declining. Once you sell, you’re left with the money from the sale of those investments. If you hold the investment, there’s a good chance it will go back up again if you have the patience to wait.

“That’s why a lot of financial institutions and  ASIC tell us to invest for the long term,” Queenie says. “You’ll be more likely to have more positive years than negative years in the stock market, the real estate market, or wherever you prefer to invest”.

What Is the Easiest Way to Invest?

Investing your money can be a daunting process, but there are a number of ways to make it hassle-free.

Passive investment and micro-investing apps are some of the simplest ways to get going and can be set up so as not to invest more money than you’re going to miss.

This is important as chucking everything you own into an investment portfolio is not a good idea if you may need to use that money down the line. Plus it means that even those who only have a spare $20 lying around at the end of the month can get in on the game too.

“Apps like Spaceship, Raiz, and CommSec Pocket are great if you’re wanting to start investing, but you’re not quite sure what you want to invest in,” Queenie says. “They essentially have different portfolios of ETFs, usually, that you can pick from. So there are growth investments and more conservative investments”.

These apps can be set up to take a lump-sum payment, like at the end of each month when you get paid, or to round up your spending each time you make a purchase to the nearest dollar and invest those cents into ETFs.

ETFs are ‘exchange-traded funds’ that spread your investment across a bundle of assets, not leaving you beholden to just one. This is a good idea as it means your investment is less exposed to market fluctuations.

These apps also often have five-say withdrawal periods which is helpful if you don’t have the discipline to leave that money alone.

Queenie says that she wishes she had known about investing in ETFs when she was just starting out.

“At the time, I was a bit too worried to pick my own investments in ETFs. So I decided to go to a robo-advisor, which is essentially a service that invests for you into a range of different ETFs.

“It’s good for beginner investors because they can actually recommend a portfolio to suit you based on your needs. And it surveys you and understands your needs”.

Should You Invest in Crypto and NFTs?

Seeing your early-adopter mates get rich quick on crypto can be incredibly frustrating. That doesn’t however mean that you should just go and throw your money into whatever coin Elon Musk is shilling at the time.

Queenie says that crypto and NFTs can be a good investment however if you’ve got the time and energy to do the research and don’t mind losing your investment.

“Everybody wants to have amazing returns of their investments, but I think that what we should all really consider and think about for ourselves is, ‘can we actually take a really bad day of losses?’ Like, would you be happy if you saw your portfolio really in the negative? If you’re not comfortable with the volatility of investments, then maybe the super risky investments aren’t for you.

“Crypto is a bit more of a risky, speculative investment. It’s definitely not for the faint-hearted, but I have invested in crypto and I do invest in crypto regularly.

“I don’t have a big portion of my portfolio… I have less than 10% of my portfolio invested in cryptocurrencies. It is a smaller proportion of my portfolio, so I’m not too scared of losing that completely and I do see it as a bit of a gamble.

“I think the technology is pretty cool personally and I think that we are starting to see a lot more mainstream adoption of cryptocurrencies. I certainly don’t know what the future will be, but I would like to have a little piece of that pie just in case it really does become the feature of currency and finance”.

How Can You Build Your Wealth Quickly?

Like with most things that people want in life — amazing talents, a rockin’ bod — there is no secret shortcut to getting wealth (unless you come from a rich family, which isn’t really a secret). Hard work and dedicated habit-forming is the only way that’s going to happen.

Queenie’s top advice for quickly building your wealth is starting with a bit of a self-audit.

“Go through your expenses from the past few months. It is a bit daunting, because once you really do start to look at your spending, what you spend money on can be a bit confronting.

“See what things you love spending money on and you’re happy to spend money on; absolutely keep doing those things. But see if there are some areas that maybe you could improve on, or maybe if you could substitute for something else. I think it really is important to have a look at your own unique situation and see what makes sense. What is a reasonable amount to save for you?

“For example, when I was on less than minimum wage, I was living on $400 a week. It really wasn’t possible for me to save any money week to week. Whereas now I’m earning a bit more I can comfortably put more money aside.

Once you’ve done a self-assessment and identified any areas you could cut back on spending, Queenie says following this up with a few simple steps can really help.

“Selling some things you don’t need is a pretty easy one. I think we all have stuff lying around that we don’t use that somebody else could purchase from us. So selling those things has been a huge thing.

“Making your own lunch, instead of buying it out, could save you around $2,400 a year if you do it every day and bring it to work. Potentially switch your electricity, phone, and internet providers if they’re not competitive anymore. You can have a look at comparison websites to find out which ones are cheaper.

“Use cashback apps. So when you’re shopping online, there are these chrome extensions, Shopback and Cashrewards, that you can install on your browser so you can essentially get cashback from your purchases. I’ve saved quite a bit of money doing this.

“A high-interest savings account, even though it’s probably not going to make you rich. Putting your emergency fund in a savings account that offers a little bit higher interest than your average savings account could save you a bit of money.

“I know this sounds a bit counterintuitive, but upgrading old technology like an old fridge that consumes heaps of electricity, could actually save you a bit of money in the long term.

“Potentially switch from an underperforming super fund. So APRA, which is the body that governs super funds, looks over like supers to see if they’re charging too much in fees, etc. and they publish reports on which super funds are underperforming. Definitely have a look into your super fund as switching could save you quite a bit of money in the long term.

“Of course, there are some other ways like potentially negotiating a pay rise, if that’s possible, or finding freelance work on the side. That could also really help you increase your savings because when you’re earning more money, it just becomes a bit easier to save more money as well.”

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