Aversion to risk

Savings. Here's what wiki has to say about it.

Saving is income not spent, or deferred consumption. Methods of saving include putting money aside in a bank or pension plan. Saving also includes reducing expenditures, such as recurring costs. In terms of personal finance, saving specifies low-risk preservation of money, as in a deposit account, versus investment, wherein risk is higher¹.

Makes perfect sense doesn't it? The less you spend the more you save. Either that or the more you earn while spending the same equates to a nifty savings account.

Many moons ago, while I was finishing up my secondary school (or was it uni?), someone came round to give us a talk. He left us with a small booklet which became my bible with regards to managing your wealth. A simple formula was included in the booklet to help us manage our finances. The formula wasn't exactly rocket science, Income - Spending = Savings. Of course, if you spend more than you earn you will end up with a huge deficit in no time. Go figure ;)

I converted that formula into an excel worksheet and for the first 3 years of my career, I diligently filled that worksheet up at the end of every month. I still have copies of those worksheets on my hard drive :) I really, really use to worry about being able to retire comfortably, but the blow has been softened up somewhat of late due to the current nature of my job.

Investment or investing those savings is another cup of tea all together. My general rule of thumb is; if you have enough in the bank (i.e savings) to maintain your current liabilities and lifestyle for 6 months, you can consider using the excess savings to invest. After all money that's sitting idle, just doesn't grow :)

How one invest depends on ones aversion/appettite for risk. Fixed deposits are the safest way to ensure that there are at least some returns on your money. But currently, Interest rates are paltry at best. 

Equities? It was a bloodbath on the stock exchange yesterday. Not for the faint of heart. But having said that, income from dividends make for a pretty decent pair of shoes most times ;) Also, it is important to note that unrealized capital gain is just that, it is unrealized! ROFL. Buy on rumour and sell on fact as they always say. 

Property? If you can afford it, buying a piece of property when it is being developed at the developer price and selling or "flipping" it when it's fully developed may, in most cases, return you a tidy sum. Or you may even decide to keep it and earn steady revenue via rental income. But as they say in real estate, location, location, location. There is talk of the property bubble bursting and it is true, property prices are at a record high now. There's a lot of speculation on the property market right now and though government legislation has been changed to curb it, people will still speculate anyway ;) 

Commodities. In times of uncertainty there is one commodity that seems to "shine" brigther than most. Gold. Gold is often seen as a hedge against economic or political instability.  Given the fact that most major countries are under severe pressure because of huge government deficits, Gold is looking like a very safe hedge at the moment. Spot gold prices really seem to be reflecting my sentiment as well :)

The best damn advice I've received about money is from my dad, he never fails to remind me that a fool and his money are soon parted. 

The best advice I've received about investing is from my sister, she always warns me about putting all my eggs in one basket.

Having ranted and rambled I would like to end by saying that I am not a trained economist, nor am I a seasoned investor , the views i have just put forth are none other then my own and should not be taken as gospel. 

1 : Excerpted from  http://en.wikipedia.org/wiki/Savings