Martin Hawes: Now is the time to budget for a better life

The first step towards investment is having something to invest.

We can talk about things such as yields, rates of return and the state of the markets as much as we like, but it is an academic exercise until you have some money.

The thing most likely to dictate how much money you have is not your rate of return, but your rate of saving.

A lot of investment capital with moderate returns will beat a little investment capital with great returns any day.

At this time especially, when the investment climate is so good, your priority is to make sure you have as much investment capital as possible so you can take advantage of cheap markets.

If you want to get ahead, you must have a surplus.

All of us - individuals and families as well as societies - depend on surpluses to improve our positions and make life better.

I'm sorry for the language, but I am going to have to use the "B" word: to get a surplus you have to spend less than you earn and the best way to do that is to budget.

The word "budget" has had a bad press, but it is just a plan for you to see where you will get your income from and what will be left to invest for your future.

With economies in recession and markets volatile, now is a great time to have a surplus. If that means living to a budget, so be it - that is the price you have to pay for a better life. Investment returns are likely to be so strong over the next decade that any sacrifice you make will be worthwhile.

All of this may seem like the bleeding obvious, but, if it is so obvious, why are so few doing it?

My guess is that many people will look back at these years with regret and disappointment and see a missed opportunity.

I am not necessarily saying you should sell the kids to get into these markets (although if you got a good enough offer ...). Nor am I saying that now is exactly the right moment to buy shares or property.

I am saying, quite emphatically, that there is good value appearing in the markets, and you should be investing as much as you can over the next few years.

You should increase your rate of savings so that you can enjoy a great investment rate of return.

This is a strategic, long-term view of your finances. It is positioning yourself to take advantage of the times. You have an opportunity - will you take it or let it slip by?

* Financial author Martin Hawes shares strategies to help you grow your wealth. Email questions to info@wealthcoaches.net