Are Your Finances in Good Enough Shape to Start Investing?

October 28 , 2018

Maybe you’ve had an unexpected windfall, or maybe you’ve had a raise. If for whatever reason you’ve got a little spare cash available, you might think the sensible thing to do would be to invest it for the future rather than frittering it away.

This is definitely a good choice, but only if your underlying finances are in good condition. Before thinking about investing in stocks, Bitcoin, or any other potentially lucrative vehicle, it pays to get your financial foundations in shape.

Build a Rainy Day Fund

Putting a sum of money aside where it’s quickly available if you need it isn’t very exciting, but it’s one of the best financial moves you can make. Emergencies happen. If you can’t handle a sudden expense without borrowing, use your spare cash to build a rainy day fund rather than tying it up in an investment.

Check Your Insurance Cover

Insurance provides a more formal kind of emergency fund. If your health insurance can’t cover you for an extended illness or your home insurance won’t compensate you for a disaster, then plugging these gaps is a sensible use of your money. Hopefully, you’ll never need to make a claim, but if you do, having sufficient insurance cover could stave off financial catastrophe.

Clear Expensive Debts

It’s often said you should clear all your debts before investing anything, but this isn’t necessarily true. A safe investment with decent returns can often be a better use of your money than paying off a low-interest debt such as a home loan.

However, if you have expensive debts such as credit cards, unsecured loans, or bank overdrafts, clearing these should definitely be a priority. It’s very hard to find a non-speculative investment which will return enough to cancel out the interest you’d otherwise pay.

Formal Withdrawal Investment

But if your financial basics are strong and you’re ready to start investing, don’t go straight for an exciting but risky option such as the stock market or a cryptocurrency. Setting up a solid retirement plan may not be quite so thrilling, but it’s an essential way of providing for your future. Put at least some of your investment funds into a safe vehicle before taking any risks, no matter how lucrative they may seem.

Investing spare funds is definitely a better idea than wasting the money on short-term purchases. But getting your overall finances in shape before investing a cent is the soundest kind of financial planning of all.

Why Choose Aman Financial Planners?

Talk to Susan Amawi, Your Personal Financial Planner

A Fee-Only financial planning firm based in UAE, with a satellite office in Jeddah, Saudi Arabia. We provide an independent, unbiased, objective review of your financial situation, and seek a long-term ongoing relationship to help you meet your financial goals. We are trustworthy, someone who cares, listens, understands and passionate about helping you.

8 Ways to Save for Retirement Today

March 31 , 2019

The vast majority of employees don’t yet have enough money to retire, according to a survey from the Employee Benefit Research Institute. The survey found that almost half the workers said they would need SR2,000,000 in order to retire. However, 28% of them have less than SR4,000 saved up. Over half of them (57%) have less than 57% saved up.

Sixty four percent of the workers said that they were behind their retirement schedule. Additionally, less than half of them (48%) say that they or their spouse have ever bothered calculating how much they will need to save.

It’s difficult to think of something that might be so far ahead in the future. However, investing in your retirement fund is one of the most important decisions you can ever make. If you’re still struggling to save up, try these handy tips:

  1. Open a retirement fund. This is the first and easiest step, yet so many Americans overlook this important stage. Part of the reason is that many young people think they don’t make enough money to start investing into a retirement plan. It’s easy to dismiss long-term investments when you’re only focusing on short-term success. You can always open up a Retirement fund with any of the local banks like SABB or NCB.
  2. Start as soon as possible. Time in the market is better than timing the market. Starting as early as your twenties can give you a major advantage and ensure that you’re set by the time you’re ready to retire. For example, a 25-year-old who stores SR300 a month (only SR3,600 a year) can expect to have over SR900,000 when he retires, assuming an 8% annual return. The longer you wait, the more you’ll miss out in the long run.
  3. Make it automatic. Automate your investing so you won’t ever miss out on payments. Many plans will automatically deduct a certain amount of money from your account on a consistent basis. Furthermore, some investment advisors can buy and sell stocks automatically so you don’t even have to think about it.
  4. Cut spending. Make a budget and track your spending. See where your money is going each month. Are there areas where you can cut back a little bit? Perhaps spend a bit less on food and drinks to add a bit more to your retirement fund. Every halala counts. Remember that a Riyal put into your retirement fund now could multiply after several years.
  5. Create a goal for yourself. Do you know how much you’ll need when you retire? The answer will depend on many factors such as where you live and how old you are. Contact a financial planner to help you set a financial goal for yourself. It doesn’t need to be exact, but it helps to have a target in mind. Do the same with your budget.
  6. Pay off your debt. The longer your debt lingers, the more it will hamper your savings. Tackling debt should be a priority. Set a goal for yourself and determine how much money you’ll contribute to paying off your debt each month. Use this technique to ensure that you’ll be debt-free within a considerable amount of time – preferably two years or less.
  7. Maintain your cost of living. It can be tempting to spend more money once you get a raise or bonus. However, you should still stick to spending the same amount of money you made before so you don’t end up over-spending. Use the extra income to add to your retirement fund or pay off debt. You’ll have plenty of time to treat yourself once you know you’ve got a secure retirement.
  8. Go the extra mile. Know how much you’ll need and then add more to it. Once you’re retired, your retirement fund will be your main source of income so you’d better make sure you’ve got enough. You certainly don’t want to outlive your retirement plan so adding any bit of extra contributions will help.

Conclusion

Saving up for retirement is something that many people overlook. However, nobody wants to run out of money because they didn’t save up when they were younger. Use these tips to get started and stay on track. You’ll thank yourself for it when you’re older.

Should You Buy or Rent Your Home?

February 12 , 2019

Deciding whether you should buy or rent your home can be a tough decision. What’s best for you depends on a lot of different factors. Here are some important things to consider before you decide to buy or rent.

Ongoing Costs

There is a much larger expense involved in owning a home than the cost of your mortgage. Consider how much you can expect in ongoing costs as well: repairs, renovations, insurance, property taxes, and so on. If you have plenty of extra income to deal with these expenses, buying can work well for you. But, if you are living on a limited, fixed income it’s better to rent, as you’ll have a lot less unexpected expenses to deal with.

Usable Space

If you’re thinking of buying a house, be realistic as to how much space you really need. For a couple with no children, a small house will do just fine and be easier to maintain. A bigger family, on the other hand, should buy a house large enough to meet their needs and have space to spare if more little ones come along. A single person who doesn’t require much space is often better off renting an apartment.

Stability

Before investing in a house, think about if you’re truly settled and stable in the area. Can you see yourself still living there 20 or 30 years down the road? Buying is a pretty safe bet if you or your partner have a stable job that won’t require you to move anytime soon. Buying is also a pretty safe bet if you’re close to retirement. If you’re not sure where you’ll want to live a few years from now though, it’s better to rent then to risk getting stuck in a long term mortgage.

Credit History

Credit History is a big one. If you have good credit history and aren’t in a lot of debt already, you are likely in a position to be able to pay off a mortgage. However, if you have poor credit history or are loaded down with debt, adding an even bigger pile of debt on top of that by buying a house is a bad idea. It’s better to rent for now until you’ve lowered your debt load.

Depending on your situation, there are advantages to buying and renting. Use the advice above to help you make the choice that’s right for you.

How To Be Financially Responsible When Vacationing

January 01 , 2019

You plan the trip, take the journey, and then enjoy the dream vacation that you’d been looking forward to for several weeks or months. What you didn’t plan for was the super-high credit card bill that awaited you once you returned to your castle. Vacations are notorious for helping consumers accrue high balances on their credit cards, all too often wreaking havoc on their monthly budgets after that.

Here’s a look at some steps you can take to avoid racking up tons of charges on your credit cards when it’s vacation time.

Shop wisely

Vacation deal websites have etched a considerable share of the vacation and travel market because people want to save the most money on their trips. Shopping around on sites like Travelocity and Kayak can give you a high-level view of what you can plan on spending per your destination, length of stay, and accommodation preferences. Plus, their all-inclusive packages can save you a lot of money on hotels and airfare, which are typically the highest vacation expenditures. Don’t forget to use any loyalty or reward points you may have on your credit cards, as they can offer significant savings on things like airfare, food, and other perks.

Cut out non-essential living expenses (or cut them down)

Try making a list of all of your monthly expenditures that lie outside of your living necessities. Things such as shopping, dining, entertainment, and even those random online purchases can be great places to start cutting back. First, figure out how much money you’d like to save each month to allocate towards your vacation, and then go through the list to determine what to cut. You’ll be surprised by how the things that seem insignificant tend to add up over a month’s time.

Create a dedicated “vacay” account 

Consider this an additional savings account, and start making deposits to it whenever you get paid. You can initiate once you begin your vacation planning process, or make it a permanent budget fixture if you know that you’re going to take some form of vacation annually. Setting aside as little as SR 200 a month not only helps you to avoid dipping into your savings or emergency budget, but it also gives you an idea of exactly how much money you have to work with when you’re on vacation.

Take a good look at your monthly income vs. vacay costs

One of the biggest reasons that people overspend on vacations is that their income level isn’t necessarily ideal for the costs of their vacation. And while vacations sites do a great job of making destinations alluring, it’s best to analyze your current monthly income, along with the trip itinerary, to determine if you have enough money (and time) to make the journey.

Find a way to supplement your current income

In today’s economy, you don’t have to look hard to find ways to make some extra money on the side of your full-time job. Gigs such as freelance writing, outsourced task services), home-based businesses, and other opportunities offer many options to help you make more money to save toward your vacation if you find that your current budget already stretched to capacity.

Not everyone has enough wiggle room in their budget to cut out enough to pay for a vacation. Maybe you live in a high-cost area, or perhaps debt, child support, or other factors make your monthly expenses unusually high. In any case, it’s hard to save for vacation when you’re barely making ends meet.

Going into debt can put a damper on the memories that can come from a great vacation. Planning and pre-budgeting can help you to avoid overspending while you enjoy your time away from home.