Eight articles based on the Money Framework by Pedro Moreira, director of Euroconsumers Invest, composed of five levels of investment and savings, we introduce a tool to help you reflect on your options and build a map of your own money or assets. The goal is to achieve the best results with your savings and investments, and please be aware that this is not the magical formula for immediate success. That formula we don’t have, but with a structured approach and some perseverance, the results of your investments can be very interesting.
The Money Framework consists of a pyramid or map with five money management levels and two support steps: Health and well-being, Insurance. We do not claim to cover all situations because we believe that other approaches are also valid. However, know that this proposal has an absolute exclusivity resulting from the author’s 30 years of financial market experience, added to the knowledge of the 36 financial analysts, who form the Euroconsumers Invest Group. Euroconsumers makes more than 50 years of people asked questions assessing the needs of European consumers and investors by providing advice through its specialised publications. In the following weeks, we will publish seven articles describing each one of the levels. The challenge comes as follows:
We aim that the reader/saver/investor build his pyramid or map to guarantee his financial independence, present and future, whether in the money accumulation phase (which usually happens after 15 to 20 years of work) or in the retirement stage. Many times we hear people saying they “can’t save” or “the money in the bank does nothing” or even “I lost a lot of money with all my investments”. We want to cover these concerns and help you to build your financial path.
The five investment levels
In each level, Pedro Moreira sets his insights on how to get the best value for your money. In the following articles, you will read Pedro’s “don’t spend today what you can spend tomorrow” advice, written simple and straightforward for you to follow. Here are some of his views for each level:
1. Where’s the Money Coming From
The origin of resources tends to be forgotten when talking about financial topics. In other words, what is your source of income?
2. Make Smart Spendings!
We address the family budget. It is impossible to start an investment plan with just cash in hand. However, if you spend your family budget wisely, you will see your money growing and create some reserves. It can happen slower or faster, depending on many factors as we all know.
We will see the recommendations of the Euroconsumers Group in more detail following a “don’t spend today what you can spend tomorrow” philosophy. And we will see that establishing rules for each expense category is one of the keys to success.
3. Be the Boss of Your Money
You may think this level is the same as the previous one. But it is not: Level 2 refers to how you spend your money today and how much is the leftover. Level 3 is what to do with this remnant. In other words, where to invest your savings?
4. Let the Money Work For You
Regarding investments, we often hear: “I don’t like risk, nor the stock market so I invest all my money in bank deposits” – sure, you can do that - but in our opinion, this is not a real investment. We’d call it a more “sophisticated piggy bank”, which means instead of having the money resting inside the piggy bank in your bedroom, you put it in the bank. In this case, we say this is not the best option for your money. If your problem is the risk, know that there are better options for that.
5. Asset Allocation With Professional Advice
Money management with expert support: this is for those who already have a certain amount of money invested in financial products - financial assets - that make it possible to build customised portfolios with the support of expert advice. It is not, however, exclusive to rich and millionaires, but the level of access to financial advisors varies from country to country. The help of a specialised company may seem a cost, but it must be seen as an investment, mainly because you are not a financial expert. You know, sometimes you indeed choose to self-medicate when you have a slight headache, but when the condition deteriorates or if you have doubts about what it might be, consulting a general practitioner becomes inevitable.
Nothing can compare to your health, but managing money is also serious. However, whether you decide to consult a financial consultant or not, we recommend you to be serious about your money.
Why is health connected with money?
You might be wondering why money relates to health when planning an investment. Well, it is the result of our experience and monitoring the entire life cycle of the investor. Much of health spending happens when you get old. The percentages indicated may vary according to the countries and on their health systems. Still, from the age of 72, about 50% to 80% of the total expenditures made in life are in health care.
If you don’t do your math often, don’t forget that at the time of transition to retirement, which occurs between 60 (Luxembourg) and 74 years (Danmark), the drop on the income for those who work can be brutal – on average, half of your income, says an OECD study from 2017. We will look more in-depth in this report. So, being a good “tightrope walker” can make a difference all the way long.
Last but not least comes the insurance
Insurance professionals argue that without this sector, many advances and innovations would not be achieved. A classic example was the moon landing mission in 1969. The message is: whenever your heritage grows, your protection should also increase.
For example, if you buy a house with credit, you already know that you should take out multi-risk home insurance. It also applies to purchases without credit, where fire insurance is required by law in most countries. But did you know that in Belgium the issue of liability for damages is taken so seriously that it is compulsory for those who have minor children to have family liability insurance? More details in the Insurance chapter of our Money Framework series.
Read level 1 of the Money Framework by Euroconsumers Invest: 1. Income: Where’s the Money Coming From.
Footnote
Euroconsumers Invest has several solutions for sharing financial information (magazines, websites) and personalised advice through a dedicated company. Supporting handbooks are available to investors, entrepreneurs and directors interested in providing support in Financial Consulting to their employees. Contact us for more information!