Using Your Savings

I’ve recently read loads of personal finance stories that deal with how to save money, but I haven’t seen many that state what you can actually do when you’ve reached your savings goal.

Everyone’s savings goals are different, some people save for a particular product that they like the look of, where as others save for no particular reason other than having a rainy day fund just in case you need it.  If you fit into either of these categories then there may be a time when you actually want to use the money that you have struggled to save.

I’m sure you all know that saving can be extremely difficult and it’s important that when you do decide to use some of your hard earned cash you get the most reward for your money.

If you have saved for a particular product that you have your eye on, then make sure you pay the cheapest price possible by doing a product comparison. No matter what you product you want to buy, there are so many online retailers that the competition to offer the cheapest price is at an all-time high, so use this to your advantage.

Saving takes so much discipline that it would be such a waste to go and spend your money on something you don’t really need. Ask yourself the question, do you really need what you’re thinking about buying? Can you do without it?

If you haven’t saved for a specific product then think very carefully before parting with the cash, strictly speaking you should always have some savings in an interest bearing bank account, this is often referred to as an “emergency fund” in the personal finance world, read more here.

If you have been saving for a big purchase, i.e. a holiday or a new car, and you’ve reached your savings goal try not to get over excited because you pay over the odds, and now you have the money you can use it to your advantage.

You could consider making your big purchase on a rewards credit card and you could end up either saving money, or getting some of your money back in other forms of rewards, then simply use your savings to pay off your card so that you don’t pay any interest.

If you’re not planning on using savings then that is a totally different matter, but make your money work for you. Do your research and find out what the best type of savings account is for you, what is the best interest rate you can get? Once you know this you can invest your savings and watch the interest grow.

The Importance of Savings

Putting some money aside for savings is a really important and smart idea. It’s so easy to get caught up in our everyday lives sometimes it’s everything we can do just to keep on top of our regular finances, such as a checking account and paying bills, but we all know in the back of our minds just how important it is to start a savings account so that when, not if, but when the day comes that you find that you need some money you will be so happy that you took the initiative to start that all-important savings account.

What if?
There are so many scenarios that could come up that could require you to come up with a large sum of money that there are too many to list, of course. Therefore, you should ask yourself some ‘what if’ questions, such as what if a member of your family needed you to fly out and help them for a month? What if your daughter was invited to a special event that could help her with her career? What if you are the victim of a natural disaster or some other unforeseen occurrence and you need money right away?

A Rainy Day
We’ve all heard the old adage that says we should save for a rainy day. This saying is a constant reminder that we should prepare for the unexpected because we never know what’s going to come our way. If you find that you are getting somewhat of a late start when it comes to savings then it might just be your best bet to open a high interest savings account.

High Interest Savings Account
A high interest savings account allows you to earn more money in a lesser amount of time and is a fantastic way for you earn money on your savings. Most banks provide the convenience of a high interest savings account so you can start by asking your bank if this is one of the services they offer. Be sure to compare all rates, terms, and fees so that you know exactly what to expect as nobody likes to be surprised when it comes to money. Well, unless you’ve won the lotto, that is.

Know that your money is always safe as well as accessible when you choose to open a high interest savings account. Try it out for a while and if it seems to working, you can even think about opening more than one.

Richard Towler is driven to help consumers find the best deals on consumer finance products such as online savings accounts and term deposits by cutting through the marketing hype and comparing products side by side. He writes on a wide range of finance topics.

Steps to help you make, and keep a budget

Budgeting isn’t fun, and the very idea of it has discouraged most of us from even trying. However, having and following a budget is essential for our future, and easy when you know how to do it. Savings offer both instant, and long term rewards. Whether you already have a budget that isn’t working out for you, or you’re looking to start as a beginner, there’s no better time than the present to create a budget for you and your family.

– Your first step should be to prioritize. Depending on your age, career, lifestyle and other contributing factors, you may find some areas of the budget more important than others. For example, adults will find retirement planning much more crucial, where as individuals straight from college may be focused on paying off student loans. For this reason, this should be your first step. Determine how and where you’ll be dividing your money, such as with a savings, retirement fund, vacation fund, credit and other debts etc.

– Your next step should involve solid numbers. Collect the information you need, and make some concrete numbers you’ll be working. Begin with summing up your income, including your salary and any other money you receive on a strict monthly basis. Then, compare this with your average monthly expenses, including bills, rent, living expenses etc. Not all bills will be consistent, which means you’ll have to estimate and over shoot to be sure.

– Once you’ve worked out the concrete basics, you can start figuring out how to cut back and have more available at the end of each month. The easiest way to is to determine what unnecessary spending you do every month, which can be documented easily by using a debt card for all purchases, and avoiding cash. Having a paper trail to look at makes it obvious as to just how much you’re spending on coffee, snacks, and other expenses you could be avoiding. This can also involve calling your credit card companies and asking for fees to be waved, or other money saving techniques.

– Once you’ve determined how much money you have left over after expenses, you can determine how much you will set aside in a savings. If you don’t already have a savings, it’s advised you begin with an emergency fund. This is a savings everyone should have, and should contain several thousand that must be left untouched. An emergency may be unexpected auto repair bills, medical bills, etc. These funds can be used to help you keep your budget on track, and should be replenished as soon as possible.

– Sticking to your budget is much harder than starting one, which is why it’s important we take the time and effort to see it through. The best way to do this is to document all your spending and income, and always contribute to your savings funds every month. Always be looking for ways to save, whether it’s buying food on sale, or walking rather than driving as often as possible.

This post was authored by Holly Adams, who works for Coupon Croc. Check them out for discount codes on more than 2,000 stores.

Why you need to be aware of mental biases

Why you need to be aware of mental biases

We all have biases which restrict the way we manage and profit from our savings. The ways we think and the mistakes we make are studied by behavioural scientists and it is important to be aware of these challenges when we are making investment decisions.

The first bias we need to address is the tendency to see something as more probable if it is easier to imagine. Lets say that you are looking for insurance to protect against a terrorist attack during a business trip to the east coast. You are quoted for two policies, each has the same premium.

Policy 1. Protects against a terrorist attack involving the destruction of major infrastructure in  New York State.

Policy 2. Protects against a terrorist attack in the USA.

The best choice is the second policy. But in reality many people are attracted to the first policy as they can imagine the attack and the consequences. The technical term for this the conjunction fallacy and it was first detailed by Amos Tversky and Daniel Kehneman.

In future blogs we will cover further biases.

This article was written by Mike Holly. Mike lives and works in Northumberland ( UK) Please place the hyper link on Northumberland.

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