Spending money may feel great but spending all that we earn will not build us much wealth. As Marlene Dietrich once put it, there is a gigantic difference between earning a great deal of money and being rich!

When we earn money, we need to budget and save.  The basic principle is to direct part of our disposable income towards savings, investments and insurances so that we can reach our money goals and have a secure future.

Life can be full of surprises and sometimes these come at a considerable expense. Having some money saved away can help us feel more secure and in control especially during an unstable financial period.

An emergency fund sets aside money to cater for unplanned circumstances such as medical expenses, car repairs, temporary unemployment. It is not for non-emergencies such as holidays. 

Emergency funds vary, depending on one’s lifestyle but it is usually suggested to keep aside between three to six months of estimated monthly expenses. To accumulate this savings requires discipline; so, start building this fund and keep adding to it as you go along – slowly but steadily. 

While we often view life insurances as an expense, failing to have sufficient life insurance cover can leave our dependants in a tight spot when faced with unexpected life situations.

Emergency funds vary, depending on one’s lifestyle but it is usually suggested to keep aside between three to six months of estimated monthly expenses

Loan repayments, school fees and day-to-day expenses will still need to be settled even if the main source of the household income is adversely hit.  Investment policies tend to be more expensive, so one could start with a term insurance policy, which is a life cover policy without investment benefits.

The amount of life insurance cover required will depend on one’s personal circumstances and therefore financial advice is highly recommended. Life insurance is a long-term investment and should be reviewed periodically. This is especially important with investment policies where the performance of investments determines the sum to be received upon maturity.  Insurance does become progressively more expensive as we grow older so the younger you buy your insurance the better.

We all aspire to retire one day – some earlier than others. Simply stated, it pays to start early, especially so when investing in a retirement plan. It may be difficult to establish the amount we require to make up for the shortfall between the state pension and the funds we will need to maintain our desired lifestyle. 

But the most important step is to start saving and investing on a regular basis, factoring in inflationary costs and personal retirement ambitions. Discussing goals and aspirations with professional people can shed light on aspects which we might not have even thought about.  Habits, whether financial or otherwise, take time to develop. Creating a realistic plan and doing our best to keep at it will get us there.  Speak to a trusted financial advisor before opting for financial products. Check about the different options available but above all, act. Even if you feel you are not in a position to start investing, know that every little bit helps. 

This article is not, and nothing in it should be construed as a recommendation in respect of investment products or services offered by the BOV Group.  Any views, assumptions or opinions expressed in this article are those of the author. Value of investments may go down as well as up and may be affected by changes in currency exchange rates. Past performance is not a guide to future performance.

Caroline Busuttil , Senior financial advisor, BOV Wealth Management