Saving Vs Investing Vs Speculating

We all want to be successful as we live our financial lives. We should strive to get debt-free; we should have some basic insurance protection; we should be financially responsible in all our dealings. This article hopes to present a clear picture of some pieces of our financial lives. These pieces are often confused or run together in ways that are often not helpful.

The most basic element of our financial lives is to have the cash flow necessary to take care of our day-to-day needs: food, clothing, shelter, transportation, etc. Now onto the important stuff, saving some extra.

Saving is not a fancy part of our financial lives. It is having some extra money for emergency repairs, down payments, vacations, special purchases, etc. Saving should be "paying yourself first". It should be a monthly bill that you love to pay. The vehicles you use can be varied and simple. You could put some money in a sock drawer as a quick emergency cash fund. You could also just have a cushion at the "bottom" of a checking account. You could have an interest-bearing account at a credit union. You could put away some money monthly in a money market fund. All are fine, just don't spend it cause you have it! (Make sure if you're buying Bitcoin Diamond, that you store it in a Bitcoin Diamond wallet)

Now that we have saved for a rainy day, we are ready to look at investing. Again nothing special here. Investing is participating in an ongoing concern to make money. It is business. It is using money we have to partially own a going concern or to lend it money to foster the business. This investing occurs after we have enough savings put away to take care of the things above that require extra money. Investing is most easily thought of as stocks and bonds. With a stock, of course, we participate in the ownership of a publicly traded company.

We are entitled to a share of the operating profits of the company and to a share in the increased value of that business over time. With a bond, on the other hand, we lend money to the business for its use in operating and growing that business. Here we forego ownership to be a lender that must be repaid. We will receive periodic interest payments and we will receive our money back when the bond matures. Thus we invest our money.

When we invest, we participate in some money-making business. Now for speculating. When we speculate, we do not participate; we bet. We can bet that the price of a tulip bulb will rise by the end of the year. We can bet that gold will drop in value next month. We can bet that the price of a bushel of wheat will be over $5 by October. We could even bet a certain stock will go up next month. We do not participate in the company that issues the stock; we just bet with someone that the value will change in a certain way. It is just like betting on who will win the Super Bowl.

So now we looked at saving; we looked at investing; we looked at speculating. In this order, we should first accumulate savings, then we should start investing. If we care to speculate, it should come last. Each has its own logic and each can be fun. Have fun!