Planning to save more and to make wiser investments is often something we think of towards the end of the month, when we see the money in our accounts dwindling — the problem is that it's not always easy to plan financially.


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  • Good financial planning practices can help you save and invest more and to do so faster.
  • You need to know your goals, how much you spend and can save a month, and your risk profile.
  • It's good to calculate the profit you need, invest at the right time, and diversify your investments.

While experts tell us there are no magic tricks or miracle solutions to help you save quickly, they do advise that good planning practices and effective management will definitely help.

While you can use methods like Japanese Kakebo method (a handwritten budget journal) to help you plan visually and to improve your saving methods, here are some other tips that may help you improve the way you save and invest.

1. Set objectives

Wanting to save $2,000 is not the same as wanting to save $10,000 — financial planning director at Abante Asesores, Paula Satrústegui, explained to Business Insider that the first thing you need to do is to set goals and know exactly what it is you want to achieve with your savings.

Setting goals means knowing exactly what profit is needed in order to realize those goals, and will help you ascertain whether they're reasonable goals.

Once you've ascertained the profit you need, you can embark on an investment plan. In order to do the latter, it's important to ensure that it's written with your investment profile in mind, as well as the deadline by which you want to achieve said goals.

2. Know how much you can save

It's important to know how much you're realistically able to save on a monthly basis. That means not just saving $100 here or $200 there; it's about being aware of how quickly and to what extent your savings will help you achieve your goals.

"Initially, you'll have to make an annual budget, bearing in mind that you'll have to factor in annual expenses like taxes, insurance, and more," said professor at the IEB's Master's in Stock Exchange and Financial Markets Javier Niederleytner. That way, it's easier to forecast how much you'll be saving.

3. Keep your expenses under control

"Often, we don't actually know where our money is going when we first commit to something," says Satrústegui.

For example, if you sign up for a loyalty card that was initially free, you may later be charged without even realizing.

As the payments are usually small at around $20 a year, if you don't go through your bank statements properly, those kinds of payments may end up going unnoticed.

4. Calculate the profit you need

If you have an objective and know how much you're able to regularly save, that means you can calculate the profit required to achieve said goals. If you leave your money in one account, you'll end up with inflation eating its way through your money and in a few years' time, may even find you have the same amount of money you started off with, which will be worth less.

That's why it's important to plan. Planning is precisely what will enable you to achieve the profits and goals you originally set within the time-frame you've stipulated for yourself or it will alert us to the fact that the objectives we originally laid out are unattainable.

With interest rates currently at a minimum, neither fixed income nor deposits offer desperately attractive returns. Therefore, you may need to opt for investment funds or other types of investment.

5. Know your risk profile

"Your risk profile is based on your psychology and, basically, can be broken down by using the bungee-jumping analogy: some people go bungee-jumping and some don't, as it's not in their nature. There are people who take risks in life and there are people who don't," explained investment strategist Victor Alvargonzález to Business Insider.

Establishing your risk profile will help you ascertain which products you can invest in and which are the most suitable for you. Someone with a very conservative profile, for example, will have less exposure to the stock market than someone who doesn't mind taking risks as much.

"You shouldn't constantly live life on the edge — you can't prepare for everything and, we shouldn't end up lulled into a false sense of security, constantly thrill-seeking," says Niederleytner on this point. It's also important to be aware that if you're going to need the money in the short term, it may be better not to invest it and, rather, to invest only what you don't need in the short term.

6. Diversify your investments

Basically, don't put all your eggs in one basket. One way of ensuring you don't fall into this trap is through investment funds, said Satrústegui. This way, you can combine several types of investments into a single product.

Alvargonzález pointed out that it's important to diversify by buying valuable assets in itself, namely as, if you buy one that balances out the other, in the end, the sum will be zero (if one goes up, the other will go down).

As well as taking these steps, you also need to be aware of whether or not you know enough about finance when managing your investments. If you're not financially literate, you always have the option of seeking assistance from a financial advisor.


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Randall Reynolds
Financial Planner, Fellow of Financial Planning Standards Council of Canada
FabPlanning....a division of Joran Holdings Ltd.
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