10 Tips For Saving Money and Building a Nest Egg
Saving to build up a nest egg is possible very early. Good news, the younger you start, the faster you will grow your money so that it pays off for you.
So how do we save? First of all, it is necessary to know your investment horizon, your investor profile and your savings capacity before starting.
1 – Define your savings goals over time
Depending on our age, the constitution of our household and our vision of savings, we will naturally not go to the same investments. To change your point of view and broaden your financial knowledge, it is possible to constantly document yourself to keep informed of all the investments available and choose those that suit you the most.
To start, it is good to know your objectives, that is to say define the purpose for which you are saving. It is even possible to pursue several intentions simultaneously. Most often, we will save in the following way:
- In the short term to finance a project: acquisition of a vehicle, household appliances, wedding budget, holidays, etc.
- In the medium term for more important needs: preparing a real estate purchase, starting a business, etc.
- In the long term in a logic of diversification: preparing for children’s studies, anticipating retirement, passing on one’s assets, enhancing one’s savings, etc.
Your investment objectives should guide the choice of media on which you save to limit risk taking and not lose your capital.
2 – Calculate your savings capacity
It is important to know your savings capacity to determine the monthly budget that can be set aside to build up a nest egg. In a savings logic, do not hesitate to make some concessions to increase your budget. It is therefore welcome:
- Avoid unnecessary purchases linked to overconsumption and satisfy yourself with the necessary
- To hunt for costs to reduce them (bank charges, telephone / internet charges, insurance costs)
- To create menus in advance so that you only buy what is necessary and not waste
Whatever income from work you have, being more economical should allow you to benefit from at least thirty euros per month to save. Of course, some will be able to put several hundred euros aside.
3 – Know your investor profile
Your investor profile is defined according to your knowledge of the financial markets, but not only. Your savings capacity, your aversion or on the contrary your appetite for risk will determine the type of media in which you are ready to invest.
Here are the three major existing investor profiles:
- Cautious, defensive or conservative profile: risk aversion is marked, you favor supports without any risk of capital loss
- Balanced or neutral profile: risk aversion is moderate, you accept to lose a little (10% at most) to gain more
- Dynamic, attacking or speculative profile: risk appetite is present, you accept the risks of real loss to obtain significant returns
Whatever your profile, it is possible to choose all the investments that we are going to offer you below. However, the choices you make within the investment will differ.
4 – Investment in savings accounts
Today, savings accounts provide very low returns. Most of them even struggle to keep up with inflation. They are therefore only useful for building up precautionary savings or financing a short-term objective (less than a year).
Prefer regulated booklets such as booklet A, LEP or LDD. Also consider boosted booklets with more attractive rates over a period of 1 to 6 months. Finally, do not put the equivalent of more than 2 to 3 months’ salary on this type of booklet, because it would be a waste.
5 – Saving on life insurance
Life insurance is suitable for all saver profiles. You can consider it as soon as your precautionary savings are built up, as it is ideal for medium and long-term projects.
Cautious savers will bet on guaranteed euro funds, balanced savers will diversify with a few real estate stocks and bonds, dynamic savers will favor stocks or other even more speculative products.
6 – Invest in your PEE or open a PER
The PEE (Company Savings Plan) and PER (Retirement Savings Plan) are, in the same way as life insurance, very interesting investments. The first allows you to benefit from an employer contribution and the second from a tax reduction.
However, it is better to favor them in the long term because savings are not available there. Indeed, only a few cases of early release, permitted by law, will allow you to recover capital and interest before your retirement.
7 – Invest in the stock market
In addition to life insurance, the stock market is increasingly easily accessible and just a click away. Contrary to popular belief, it only constitutes a very moderate risk of loss if diversification is well done and considered as long-term savings.
Of course, some more aggressive investors may opt for risky products with high leverage and high risk of loss. It is recommended to open a PEA for a medium and long-term investment horizon, or a CTO for short-term needs or access to certain specific products.
Before choosing the establishment in which you open your stock market account, pay attention to the rates offered. From one bank or broker to another, the fees can vary by a factor of ten.
8 – Invest in stone
There are many ways to invest in stone. This can be the acquisition of your main residence, the acquisition of rental accommodation or the holding of shares in real estate companies.
The stone remains an investment appreciated by the French because it has a timeless image. However, losses are possible in real estate and on the stock market, the risks of unpaid rent are real, poor workmanship is unfortunately common.
9 – Key word: diversification
Saving well means making your money grow, so that it does not sleep. As you will no doubt have understood, all investors start with the simplest and most secure investments such as guaranteed rate savings books.
Gradually, he moves towards products more suitable for the long term according to his investor profile. Whether it is life insurance, PER, stock market or real estate, each investment must be based on diversification.
For example, we do not put all our shares in EuroTunnel, but we vary the supports or we choose trackers made up of several values. The rule is not to put all your eggs in one basket.
10 – Be accompanied
Many French people want to build up a nest egg, especially in times of crisis that we are currently experiencing. To invest well, it is wise to seek outside help by asking for a balance sheet, for example.
A financial adviser knows how to guide you according to your profile and your understanding of the financial markets and avoids you many disappointments. A first assessment is most often offered free of charge, a second can be considered to go further.