In this little series, I’m looking at a some financial mistakes that can really harm our FIRE. It’s in no particular order, but it’s nonetheless a long list, as there are many more ways to deplete our savings, than to increase them 😅.
(Standard disclaimer: these are just my personal opinions and do not constitute financial advise; if in doubt please speak to a financial advisor)
Now, without further ado, today’s mistake is….
Not investing your money
This one really shouldn’t need any explanation, but there you go: inflation will eat away your savings, year after year, if you keep them under the mattress. Anyone who doesn’t need the money in the short term should consider investing their savings to – at least – preserve their value.
In the long term, an investment in shares should return between 6-7% per year (the percentage varies depending on the studies). Obviously this is an average, so don’t forget to keep an emergency fund. Experts suggest at least 3 months worth of expenses (although the majority would suggest 6 to 12 months).
The Family’s Perspective
Our emergency fund covers around 2 years worth of expenses, as we think it’s important to have a cushion to be able to ride out any crises that could happen. You don’t want to be a forced seller right? If the situation is bad, we are ok to let our cushion reduce to 1 year worth of expenses.
Are we going to make this mistake?
All our savings are usually fully invested, except in very rare circumstances (for example, during the Corona Virus pandemic, we have a high proportion in cash). But in general, no, we won’t be making the mistake of not investing our money.
…More money mistakes?
Check out the full series here.