Investing money and saving money are two very important factors to know about if you want to retire early. But which one is the better choice?
It's actually not a very simple answer. It almost always depends on how much money you have, the amount of your income, and the amount of your expenses each month.
If you are like me, that means you aren't quite living paycheck to paycheck but fairly close to it, then I would consider putting about 3-5% of your monthly income into a savings account, preferably with a credit union. My personal credit union has a really nice high interest rate and I can access my money anytime if I need to for an emergency. Putting your savings into a savings account rather than keeping in your checking account is crucial because, as it has happened to me numerous times, I end up dipping my hand into the cookie jar so-to-speak and start spending what I am trying to save sometimes without even noticing. In a savings account your money can still be accessed at anytime but will most likely think twice about withdrawing the money so there is a better chance of keeping it in the savings account.
For people like me I recommend saving your money first in a savings account until you have enough money for emergencies. If you aren't like me, and you have plenty of money for backup and you are trying to increase the amount of commas in your bank account, then I would consider Investing.
Investing is the process of using your money, or other capital, to buy assets that you think will generate a good return of money. There are loads of different investments you can chose from. The most popular being stocks, bonds, real estate, and mutual funds. Investing is very rewarding and very dangerous at the same time. One day you can make thousands and the next day you could lose everything you own. I wouldn't consider investing your money unless you do your homework and study on the best ways for yourself to make a profit. The safest ways to invest your money, in my opinion, are certificates of deposit (CDs), money market accounts, municipal bonds, and Treasury Inflation-Protected Securities (TIPS).
The downfall about investing your money, in my eyes, is that once its invested you cant just back out of the investment and get your money back that same day. Sometimes it takes a few days or even a week or two to recover your money, depending on how you invested your money. Also, depending on how you invested, there is a fair probability that you could lose some or all of your investing money.
Like I said, if you are going to invest, do lots of studying before you put your hard earned money into the hands of other people or other companies. If you want to play it safe and put your money into a savings account and gain off the interest rates, and then once you have plenty saved up, you could use a small portion and test out different methods of investing.
Whichever method you chose, good luck! And I hope you gained something from this and will spread the knowledge around to people who need it most!
