The ongoing recession makes us all reconsider how we handle our cash flows. Each month money comes in, we spend, we save and maybe we save. Yet today more than ever as earnings and inflows are volatile there is a need to ensure that to any extent practicable, daily investments don’t suffer. You will have to worry about investing less, for this reason, however, the result over a period of time would certainly have a positive effect on your future financial life.
One way to ensure that the daily investments are the last to fail is to automate them.
What does automation entail?
Automation of the finances can already be part of the routine. In basic words, it means that you put a program in place such that every month the daily investments happen without a need for any manual interference. The choice to invest, the sum to invest and the time to invest will all be automated. Mutual funds offer a very easy way to do this through systematic investment plans (SIPs). They will optimize your long-term savings, your short-term saving, and donations to the emergency fund.
A systematic investment strategy is a fixed amount that is spent per month in a fund of your choosing. Depending on your long and short-term financial objectives you can choose one or more schemes and assign SIPs of a preferred amount each month. You can also pick the number of months to do this.
Consider saving a habit
Left up to your discretion, you may not end up investing the same amount every month. There are growing temptations and far more nudges for people to spend their money than there are for saving. Therefore, if you imagine that at the beginning of each month you’ll know how much to spend after making some investments, you’ll eventually find that you have different sums per month and potentially none left after a few months.
It lowers emotion
An automatic investing strategy helps you to keep up your savings in volatile markets and periods of uncertainty when you otherwise can become too cautious and not want to invest. On auto mode, you should let it pass rather than thinking too much about temporary failures and corrections. Thus, ensuring you also invest in growth assets at cheaper rates, which helps create potential value.