By Guest Expert December 10, 2023

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Balancing Property Investment and Personal Savings: A Guide

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Balancing Property Investment and Personal Savings: A Guide

Saving and investing are two key habits that support financial health, but it’s important to recognise that these two strategies shouldn’t be used interchangeably.

Knowing when to invest and when to save requires a carefully planned-out system.

You wouldn’t want to miss out on opportunities to grow your wealth—especially with an asset as lucrative as real estate.

But at the same time, you wouldn’t want your pockets to be bone-dry when you or your family are going through an emergency.

With all that said, the fact is that there’s no one singular approach to handling your money.

And for homeowners at the crossroads between these two approaches, it can be tough to decide which is the better option for your specific case.

This is where this guide will come in handy.

We’ll gloss over proper property investment and personal savings practices and ways you can maximise both sides effectively.

Difference Between Saving and Investing

While they may appear similar at a glance, saving and investing cannot be any more different.

Saving is all about securing your cash or money in a safe place, typically a savings or checking account.

This form of cash is easily retrievable due to its liquid state, meaning your cash can be easily accessed when you decide to withdraw an amount of it.

On the other hand, investing involves putting your money in a potential growth channel in hopes of getting a good rate of return.

Many investors allocate a portion of their net worth into investments—such as stocks, bonds, and—the star of the show—commercial real estate.

Investing in moderate to high-risk investments has no immediate or guaranteed payout, so there is a possibility of loss.

On the flip side, savings have zero risk involved, but there’s very little room for growth of the cash within the account.

Many notable investors would say that it’s important to have a healthy mix of both investments and savings.

That said, there are times when one tactic is more favourable than the other.

When to Focus on Building Personal Savings

Building personal savings is a habit that’s valued in every stage of life, from a person’s childhood to their senior years.

If you’re in a financially precarious situation, you should prioritise building your savings account.

In fact, you should always seek to be stable before looking into investing.

Stable, in this regard, means that you need to have enough money to sufficiently cover your house bills and expenses while still having a little bit left over for emergency purposes.

Building a sizable savings account is one no-brainer way to achieve stability.

If you’re looking for specific signs to build your savings, here are these signs in more detail:

When you’re short on capital
When you’re retired and want to reap your investments
When you’re not in a position to take excessive risk
When you’re building an emergency fund
When there are no ideal investment options
When you’re working to reach a short-term goal

Having a savings account is important since it essentially acts as your financial cushion.

Having no money in the event of emergencies can force you to take out a high-interest loan or liquidate your assets, which can be detrimental to your portfolio and financial health at large.

Need quantifiable data?

Follow this link to determine whether your short-term saving goals are feasible or not, given your monthly expenditures.

6 Ways to Increase Personal Savings Effectively

Looking for some tips to increase the money in your bank account?

While everyone wants to magically see the numbers in their bank account grow bigger, we all know that’s not going to happen unless you put in the hard work.

If you’re in a pinch and need some financial awakening, here are some tips to grow your personal savings with relative ease:

Track each one of your expenses
Automate your savings
Decrease impulsive purchasing behaviour
Consider getting a side hustle
Cancel useless subscriptions
Take advantage of discounts when buying needs

These are just some of the few ways you can improve your savings.

By getting these done, you can slowly but consistently build a much healthier savings account.

When to Invest and Improve Your Property Portfolio

Investing your wealth can come in varying levels of intensity.

Many newbies invest a portion of their income in index funds and bonds.

Others could focus on specific stocks in the market.

Investing in real estate is one of the riskiest but most potentially lucrative ventures an investor can consider.

If you’re an investor with enough capital who’s unsure of whether to invest in property or not, here are some signs that generally indicate that it may be in your best interest to invest in new properties:

You have a healthy amount of savings and are looking for opportunities
You’ve found a great property deal that’s sure to turn over profit
There are tax benefits when you invest in new property
You have a positive cash flow with little to no debt
The real estate market and economy at large is booming
Owning a property will help you achieve your financial and personal goals

It’s clear to many folks that Investing in property is a much more taxing activity than simply saving money.

While it’s likely not your first time in the real estate rodeo, it’s still in your best interest to talk with a real estate professional to help you sort through the legalities and complexities of entering a housing sale contract.

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6 Ways to Improve Your ROI on Property Investments

If you currently own property investments—or are currently securing your first one—it’s important to make the most out of these assets.

The approach will differ depending on whether you’re buying a property or have one already.

Regardless, here are some useful tips that will aid you no matter what part of the homebuying journey you’re in.

Scour the internet regularly for good deals on homes and properties
Attempt to negotiate with sellers to secure a property below market value
Undergo quick and simple renovations to improve the saleability of the property
Increase the price of rental income for tenants if it’s too low
Make repairs to hold the interest of potential buyers
Use tax strategies to be eligible for local tax deductions

Managing a property portfolio can be tough, especially if you’re doing it with little prior experience.

Regardless, it can be very successful if you find a buyer for your flipped property or close enough tenants for your rental.

Can Property Investments and Personal Savings Co-Exist?

Absolutely.

In fact, a healthy portfolio includes a healthy amount of savings and at least one major asset investment like a property.

A good rule of thumb for knowing how much to save and how to spend is the 50-30-20 principle.

This principle states that for your after-tax income for the year, 50% should be in expenses, 30% in wants, and 20% in savings and investments.

While every person’s financial capacity is different, this philosophy can be useful for individuals who may be struggling to keep their financial health in order.

Be financially well!

About Guest Expert Apart from our regular team of experts, we frequently publish commentary from guest contributors who are authorities in their field.