by Marcus Bentley Wise

Created on: April 13, 2010   Last Updated: April 15, 2010

The problem with needing money to make money, is knowing how much money you need to start. And to work that out you need to ask yourself a few questions.

A definition of a person who is financially sound is a person who has more coming in than they do going out. So if your earn the average wage today that in the United Kingdom is in the region of £25 thousand and your yearly out goings are £20 thousand you are in that bracket. But for the vast majority of us hitting this bracket, with the usual cost of a mortgage, cars, spiralling bills, cost of living and the constant uncertainty of what is going to happen with your job, all of this makes very one very wary of what to do.

The thing that you need to do is understand where you are financially and then calculate a plan to invest and save. This is working on the choices that are right for you and that you are comfortable with. Then going forward, having to go back and looking at them to see if what you are doing is right for you. As a rule you do not want any more that a third constant fixed out goings, mortgage, pension and long term loans. That leaves you with the rest to spend on all the other bills that you have coming in. Out of that you want to put aside an amount that you can save. Split the saving in to short term saving. A sort of petty cash amount just in case you have a bill come in that you can use it on. And cap that amount so that it does not grow too big. Then put another amount in to a regular long term saving plan.

To get the balance right you need to first star to save on a regular basis. Then when you have built up an amount of capital say £5000 then divert some of this in to investment. The amount is up to you. But to be on the safe side I would not commit any more than one third. You can commit more, you could commit every thing if you so wish but over all to have the safety net of a set amount of cash that would hopefully see you over a period of time if you found your income had reduced.

So once you have figured the amount of money that you are prepared to invest, then it is a matter of what investment you are happy in investing in. Here to options are many and as long as you are sure that what you are investing in now will make a more money in the long run then you should be alright.

And this is the option that you have. You could keep all your money in the bank and try and get the best rate of interest. This offer you some return and little to no risk. But to invest you have to face the problem that what you invest in can go up as well as down. But in the long term over the past years apart from bubbles and over speculative markets. Most investment in property, stocks and bonds has proved to be a good long term investment overall. It is matter of knowing when to invest and what the market is doing.

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