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Thinking of the future and putting away for a rainy day can sometimes be the last thing on our minds in today’s world. With such an unstable economy and prices for everyday goods soaring, savings can be the last thing on our minds when making ends meet is such a struggle.
The first thing to bear in mind though, is that if you’re thinking about starting to build your savings it’s important to pay off any existing debts first. The reason for this is that the interest you will be charged for most forms of credit will be much greater than any you will receive from a savings account. If you’re not sure how much debt you have try out our handy debt calculator. Make sure you are not losing money as you save! If you have the money, pay off your debts or else they’ll simply get bigger and bigger.
How to save
Surely a full paragraph dedicated to ‘how to save’ will be a bit patronizing, right? Well, ‘Don’t spend all of your money each month’ should pretty much cover it but as we all know, it’s easier said than done. So here are some helpful tips to get you on the right tracks.
Taking the approach of putting away whatever is left in your bank at the end of your month can be efficient if you view seeing how big a chunk of your wages you can leave there as an incentive. However this carries with it the temptation dipping into this leftover fund for whatever luxuries may take your fancy.
Deciding what you are able to save each month prior to actually beginning your expenditure can be a big incentive in helping you not dip into the amount you decided to save.
The key to success with either of these approaches is budgeting. If you plan exactly what you know you need to spend each month then you can know exactly how much you can spend.
Trying to save money can be as easy as adjusting your spending habits by as little as purchasing the a lower level of brand than normal. For Example, if you would normally purchase a leading brand, switch to a supermarket’s own brand or if you already purchase supermarkets’ own brand products, switch to value brand products. This simple strategy could save you small fortune on your weekly food bill.
Although this strategy is effective, and this applies to almost any money saving strategies, you need to plan your purchases. It’s no good judging your expenditure on an item to item basis; you need to plan out your spending for the month in order to avoid unnecessary spending.
Where to put your money
A Cash ISA is a very simple way to begin your savings, anyone in the UK over 16 can set up one up and you can do it with your existing bank you have your current account with. The Cash ISA will allow you to deposit just over £5,000 per year, tax free! You can deposit more however you will pay tax on the interest you gain from the amount above this figure. You can Deposit this amount each year and you can also open up 1 Cash ISA account every year.
This means that after your first year of savings you can open up your second Cash ISA and that will allow you to deposit over £10,000 Tax free in your second year of savings.
You can open up a new Cash ISA and deposit up to £5,640 Tax free every year, so if you already have a Cash ISA then you will be able to open up a new one as early as April!