#1 Define your amounts

• How to approach defining the right amount of money to invest
   
• Tools that can help with these calculations
   
• Answers to frequently asked questions

• Figure out your budget (see the budgeting module for details)
   
• If you have debts, check how much you need to repay your debts and if you want to speed up the process
   
• Check your safety fund: if it has holes, set some money aside to fill it up
   
• For all the rest you can spare, set an auto-transfer to go into your investments

📍 This approach will get you started quickly, but it is not the most effective way to ensure you reach our goals as the amount you have left might be too small (or too large) to get you to your objectives.

One way is that you can use the 50-30-20 rule and invest 20% of your monthly income. 

• Take stock of your monthly or annual income
   
• Subtract taxes
   
• Invest 15-20% of the total

Using a formula is a simple and intuitive way to get you started quickly. 

📍The downside is, that it does not factor in any repayment of debts nor a potential build-up of your safety pot in a structured way unless you subtract these amounts before calculating the percentage. The formula also does not take into account how much you really need for retirement or your long term goals. 

With this approach you define a personal investment amount based on your financial plan and your mid and long-term goals.

1. Look at your budget and factor in: a contribution to your safety fund and an amount to repay debts if needed
    
2. Now work backwards from your financial plan:

• Define how much money you need for your mid and long-term goals
• Calculate how much you'll need for your retirement based on your personal circumstances
• Calculate with an investment calculator how much money you need to invest today to reach a certain sum in the future. For this you'll need to take some assumptions, such as defining how much risk you are willing to accept and how much return you can expect
• Include the result of this calculation into your budget

📍 This method might sound a little bit complicated, but in reality it is not too difficult to figure it out, here's a quick example:

Bear in mind that all online investment calculators are designed to show how putting your money into an investment product could help you to achieve your goal. 

The results are based on the figures you put in and the options you choose. They are only intended to give you an indication of possible returns and are not guaranteed results. Investment returns can go down as well as up, and you may get back less than you invest.

Here is a short collection from our seminars:

Should I pay off debt or invest?

This very much depends on the type of debt you have and the interest rate you pay and what you would earn with your investment. Short-term debt like credit card fees usually have a very high interest rate, so you might find it more beneficial to pay that off. Long-term debt such as a mortgage on your house might have very low interest, in this case an investment with respective expected returns might provide you with better results.

I don't have a safety fund yet, should I build that up first and then invest?

If you don't have a safety fund at all yet, it's great to start building one. But you also can go at this with a dual approach, for example put part of your money into the safety fund, and invest the rest. This depends on your personal situation and the risk you're facing to determine how important the safety fund is in your given situation.

If you have an emergency fund already, check if it has an appropriate size - you don't want it to be too big either. If you want to give your emergency fund a boost, consider investing a small portion of it, e.g. 5% with an appropriate risk strategy. This can provide you with overall better returns than no interest on a savings account.