The good news is that even by setting a small amount aside each month, you can start investing and gradually building your assets. This is illustrated by the following example calculation: if you start investing CHF 200 a month at the age of 35 for 30 years with an average return of 4%, you will have accrued assets of just under CHF 140,000 upon retirement at the age of 65. If you put the same amount in a savings account with average interest of 0.05%, you will have accrued assets of CHF 72,541 over a 30-year period – in other words, just over half as much.
Investments can also be made with small amounts of money
Do you want to invest your money in shares or funds rather than leaving it in a bank savings account? But you´re not certain how much you can spare or should invest? These are questions you need to answer before making financial investments. Setting a budget and a clearly defined goal will help you.
A savings account for emergencies and short-term goals
How much money you have disposable a month to invest depends on your income and outgoings. The key thing is to only invest what you can afford to. Living expenses and reserves for emergencies take priority. As an investor, you should always set aside cash reserves equivalent to around three months worth of salary. This means keeping back money which you can access immediately in the event of an emergency. You may need a new car sooner than anticipated after an MOT. Or a large invoice may drop through your letterbox after a visit to the dentist. Your personal needs and desires may also change – if you’re planning a long trip or family holiday, you’ll have to save up. Ideally, you should use a savings account for short-term goals and reserves. You should only invest money that you can afford long-term.
Budget planning for your potential investment
You can work out how much you have available for investment through simple budget planning. Here’s how it works: your monthly budget is determined by your monthly household income minus your monthly outgoings. Your outgoings include your monthly costs for taxes and social security contributions, accommodation, healthcare, insurance, your household, consumer goods and mobility. In addition, there are also expenses for hobbies, leisure time and travel – you also have to include money set aside for emergencies here. Adding all expenses together will give you your total monthly outgoings.
Make sure you are honest with yourself when working out your expenses. Not planning your budget correctly is a pointless exercise. It is best to discuss your calculations with somebody you trust – their input will help you.
Now deduct all outgoings from your income. What’s left over is your potential savings. You can invest this effectively using the type of investment that appeals to you most.