First steps

During all the life each person faces with need of his budget planning. Planning your personal financial project you will definitely ask yourself several questions:

• Are you waiting for serious changes in the structure and volume of your income?

• What is the need in cash in the nearest future (for example housing expenses, personal purchases, and regular credit payment)?

• Which amount of income are you planning to safe in order to collect money for your needs in nearest future (for example for buying a car)?

• Which amount of your income you are ready to invest for a long-term period?

When your income increases there appears changes in distribution between consumption, savings and investments. At the same time the increases of part of investments do not have to reduce current and deferred consumption.

Savings and Investments Instruments.

The most spread savings and investments instruments available for wide range of investors are:

Non-financial instruments:

• Real estate;

• Direct investments (private business);

• Other non-financial types if investments.

Financial instruments:

• Bank deposit;

• Securities;

• Mutual funds.

All savings and investments instruments (both financial and non-financial) are characterized by three main parameters:

1. Profitability;

2. Liquidity (capability of instrument to be convertible into cash);

3. The level of risk.

At the same time it is important to remember that:

• real income on any tool is less than nominal income on a rate of inflation;

• the level of profitability is directly connected with the level of risk of an instrument (the higher is level of profitability the higher is level of risk);

• the necessity in cash not always may be planned;

• the term of investments is defined by investor himself;

• the attraction of an instrument should be evaluated regarding personal attitude toward combination of all three parameters.