Personal Loans

Why Save Money

It is a good idea to have an emergency fund to meet unexpected expenses and pay for basic necessities in case of loss of income or loss of employment. At the same time, the decision to save or not also depends on the current economic situation. When rates are at historic lows, which is the current situation, savers are literally punished and pay to keep money in their checking and savings accounts. At the same time, inflation is eating away their savings and many choose to keep their money under the mattress.

Is Borrowing Better Than Saving

Again, this depends on the current economic situation and interest rates. In some cases, taking out a low rate loan is a cost effective solution and more people can afford to borrow. They have more cash to spend on everyday and big-ticket purchases and improved purchasing power results in higher inflation and economic growth. The recent drop in oil and gasoline prices is one of the main reasons for the current state of affairs. When the pace of inflation eases over a longer period and interest rates are still low, this is a good time to borrow at a low cost.

Is It Always Good to Have an Emergency Fund

This depends on your income level, whether you have additional sources of income, number of children and household members, your age and short- and long-term financial goals, retirement goals, and other factors. There are some arguments against having an emergency fund, and one is that most financial institutions which advertise savings accounts offer a low rate of return. In this case, having an emergency fund is a particularly bad idea if you hold multiple, high-interest debts. Debt balances sitting at 15, 20, or 30 percent will cost you dearly, regardless of the earn rate on your savings account. Holding cash in a savings account may make sense but this depends on the amount deposited, the earn rate, and the state of the economy. Many consumers opt for a savings account because of the fact that this is a liquid, low-risk product. There are other ways to invest free cash such as bonds, stocks, certificates of deposit, money market accounts and riskier investment strategies such as Forex trading. In general, consumers save money to meet unforeseen expenses, pay for home and car repairs, and other major repairs. It is also a good idea to have an emergency fund in case of a sudden job loss due to an accident or another unfortunate event. Many people save for retirement, but there are better ways to grow your money than opening a savings account. Some people also use their emergency fund to pay for vacations and to make a down payment for a vehicle or house but again, this depends on inflationary pressures and rates and this is not what emergency funds are meant for.

How to Make Sure Your Savings Are Not Eaten Away by Inflation

There is no straightforward answer to this question but basic investing tips can be of help. When inflation is high, your savings are menaced because interest rates are also low. Unless you are offered a high-interest savings account, the purchasing power of your money is steadily declining. One way to protect your savings against inflation is to take more risk with the goal of getting higher returns. Financial advisers recommend investment strategies that are medium-risk and bring higher returns. One option is to invest in inflation-bearing bonds and the best part is that you benefit from tax-free returns. The rate also increases over time. Another option is to invest in stock but this is a riskier solution for seasoned investors. You may want to look at alternatives, for example, stock and shares ISA which is one way to secure income from shares and stock. It is also a relatively safe investment vehicle that brings inflation-beating returns. Basically, this is a type of ISA that allows some degree of flexibility. The returns depend on the types of investments customers choose to buy. Some businesses pay regular dividends and offer the opportunity to get decent returns. There are other investment vehicles such as annuities, mutual funds, commodities, equity, and others. Other options to protect your savings against inflation include money market mutual funds, savings bonds, corporate stocks and bonds, state-sponsored tuition plans, and education IRAs. You can also look into investment vehicles such as treasury notes, bills, and other securities and exchange-traded funds.

Conclusion

Whether it is a good idea to save or borrow depends on many factors, including your personal and financial circumstances and the state of the economy and global financial trends. One way to protect your savings when inflation is high is to use different investment strategies such as dollar cost averaging, portfolio diversification, and allocation of investments. Some investment instruments are safe and low-risk but bring low returns. They are also more liquid meaning that customers are allowed to withdraw their money without penalty and at any time. Other instruments are riskier or less liquid and offer higher returns. Whether it is a good idea to save depends on your financial goals, i.e. early retirement, buying a new vehicle, a college fund for your kids, and so on. Think of your mid-term and short-term goals as well (holiday purchases, travel, paying off debt faster, etc.) Saving can also help become financial independent and live a stress-free life.

Is Debt-Free 2015 Possible? Start Planning Now

Medical bills, car and mortgage payments, and card balances add up unless you acquire good financial and budgeting skills. Specialist advice and online spending and budget tools can help sort out your finances for a debt-free new year.

1. Get a Good Look at Your Budget

The first step is to look at your family’s budget, income, and expenses. Make a list of all sources of income, including bonuses, wages, salary, rental income, cash in savings accounts, employee achievement awards, child support payments, and others. Then list all expenses, for example, utility bills, insurance premiums, groceries, rent, loan and credit card payments, and others. Compare your expenses and income to see where your money is going. This will help you to make a good decision about future purchases and how to allocate your money.

TOOLS: Budget Tools and Calculators

One option is to use online budget tools such as planners and calculators. Some tools help track sources of income, spending, and savings, investment, and checking accounts. There are online budget calculators that allow users to develop a budget based on their total income and expenses such as health and medical bills, clothing, transportation, housing, food, utilities, and others. There is an option to print your budget. Some online calculators allow users to plug in monthly expenses and savings and annual income and expenses.

2. Set Your Financial Goals

Setting your financial goals is also a very important step. Consider factors such as total debt, income level, household size, age of family members, and others. If you have excessive debt, it may be a good idea to prioritize debts. Setting up an emergency fund is also a good idea. You may want to open a savings account to save for unexpected expenses such as medical bills and car and home repairs.

Think of long-term and short-term financial goals you want to achieve. Examples of short-term goals are saving for a summer holiday or car down payment, minor home improvements and projects, buying furniture or electronics, and others. In general, these are goals to achieve over a period of 1 – 2 years. Long-term financial goals take more time to achieve, i.e. 5 – 15 years. Examples are saving for retirement or college education, saving for a large mortgage down payment, and others. Such goals require financial commitment and discipline.

TOOLS: Financial Goal Calculators and Other Tools

There are some tools that help set your financial goals, including money saving apps, tools to track spending, financial goal calculators, and others. Financial goal calculators ask users about their monthly income before taxes. Users can choose from different goals, for example, saving for retirement and getting out of debt. If you are looking for ways to get rid of debt, choose this option and plug in details such as payment frequency, interest rate, current balance, type of debt, target end date, payments, amount, and others. There is an option to view a debt chart.

3. Reduce Your Spending

This is one way to get out of debt quicker. Look at your list of expenses to see if you can reduce your spending. There are different ways to cut your spending without changing your lifestyle too much. It is a good idea to create a shopping list to avoid buying on impulse. You will also save on gas by making a single trip to the grocery store. Compare prices at different stores and clip coupons to reduce your spending. Instead of eating out, you may want to pack your lunch to save money. Unsubscribe to sales alerts to avoid impulse purchases.

TOOLS: Cut Back Calculators to Track and Reduce Spending

You can also use different online tools that help reduce your spending. There are cut back calculators that allow users to choose from different purchases, for example, takeaways, petrol, music, magazines, lottery tickets, gym, and movies. You can also choose from fares, coffee, cigarettes, chocolate, alcohol, and other purchases. You are also asked about the price and purchase frequency. For example, if you smoke 1 pack a day and it costs $4.50, you will save $135 a month.

4. Use Debt Consolidation Specialist/Service

Using a debt consolidation service is also an option if you have high interest balances. Consolidation specialists help customers to secure a lower interest rate and more affordable payments.

In general, debt consolidation is an alternative to bankruptcy, credit counseling, and consumer proposal and can be used for unsecured loans. If you have multiple high-interest cards, you may want to transfer your balances to a low-interest credit card. The right approach depends on the types of debt you have, the amounts owed or outstanding balances, the interest charges, repayment terms, credit standing, and other factors. Debt consolidation specialists offer professional advice and counseling and free savings estimates. Your consolidation specialist will ask about the total debt held, including student loans, health club memberships, lines of credit, medical bills, and legal bills. Other types of unsecured debt include cell phone bills, personal loans, department store credit cards, and unsecured credit cards. Secured loans are not accepted, including auto loans and mortgages that require collateral. Specialists also offer personalized solutions to your debt worries as well as tools, tips, education, and resources.

TOOLS: Debt Consolidation Calculators

You can use debt consolidation calculators to find out how much you will save. To this, choose from different types of debt such as retail credit cards, standard credit cards, consumer loans, and others. Enter the estimated monthly payment, current balance, and annual percentage rate.

5. Become Debt Free

There are different ways to go about excessive debt and alternatives to choose from. Options to consider include settlement, debt management plans, budget planning, individual voluntary arrangement, and self-money management. Other options include formal proposal, negotiation, and debt restructuring. These are alternatives to bankruptcy, and the choice depends on whether you have delinquent or excessive debts and other factors. A home equity loan is one option if you have debt problems. In this case, your home equity is used for loan repayment. The good thing about home equity loans is that lenders offer attractive interest rates because your home serves as collateral and a guarantee of repayment. A debt management plan is another option to pay down your outstanding balances. In this case, your financial institution may be willing to lower the interest rate to make payments more affordable, especially if you are about to default. Finally, debt settlement is yet another option to become debt free. This method involves a cash settlement with your financial institution. A one-time payment is required in exchange for a partial debt payment.

Is It a Good Idea To Save Money?