Saving


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Getting into the habit of saving a proportion of your income (not spending it all) underpins all financial success.  You could earn a million pounds a year but if you keep spending it all, you will end up broke.  Just think of certain celebrities...

If you have read other sections of this website, you will understand we're much more than a comparison or news website.  We care very much about financial education and fundamentals.  These might not be quick fix and sexy, but without them all the money saving deals and news mean nothing.

Saving money is simply the result of creating surplus income, having a financial plan and managing your money. Without having a plan and organising your finances, saving will be undisciplined and sporadic at best.  Make sure you don't overlook these vital principles.

So what are the benefits of saving?

This may seem like an obvious question but because saving doesn't give people instant and obvious gratification, it's worth reminding ourselves why developing the habit of saving offers significant benefits.

  • Without a savings fund, unforeseen financial demands can push you into the red, or require you to apply for finance which has to be paid back with interest

  • Getting into the habit of saving will create a reserve of money you can then use for investment opportunities

  • Money left in your current account receives a low rate of interest (usually lower than the rate of inflation).  The impact of inflation reduces the value of your money, whereas money that is held in high interest savings accounts or a cash ISAs almost always beats inflation

The key to saving is making it a habit.  Remember - money that has no purpose tends to be frittered away or in other words, spent on 'stuff' you don't really need.

Five Tips for Saving

  1. Decide how much you can realistically save each month and commit to that amount.  We recommend a minimum of 10% of your income
  2. Make it automatic.  In other words, set up a system whereby the amount you are saving each month is put away in to a savings account before you can get hold of it and spend it.  For example, you could set up a standing order from your current account to your savings account on the day after you receive your income each month
  3. Cut your costs.  Review your outgoings and cut out anything that doesn't bring you enjoyment or value.  Periodically review your household bills like gas, electricity and phone and broadband  to make sure you're paying the most competitive rates on your utilities
  4. Make sure you're getting the best possible rates of return on your savings
  5. Start NOW to take advantage of the magic of compound growth!

Conclusion

Take the time to write down or review your financial plan.  Without some clear financial goals and a plan to achieve them, you will not be motivated to generate the required level of income and / or develop the habit of saving.

Make a firm decision for save at least 10% of your income, even if your outgoings dictate you can't do it right away.  Once you have the income to save each month, make saving it automated so you're not tempted to spend it.

If there is one common trait which ALL financially successful and wealthy people have in common it is this - delayed gratification.  In other words, they make shorter term sacrifices  for longer term gain.

Create the right habits now and you will experience the fruits of those habits such as more money, more time and more lifestyle in the years ahead.  Fail to create the right habits and you will pay the price of lack of money, lack of time, less choices and a lack of self-esteem that goes with it.

Useful Links

>>> Article: Money Saving Ideas
>>> Debt Management
>>> Compound Growth Calculators
>>> Getting the Best Mortgage Deal
>>> Saving Money on your Insurance
>>> Saving Money on Utilities
>>> Best Savings Accounts
>>> Best Cash ISAs

 

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