You can afford to save now – here’s how

You can afford to save now – here’s how

Are you one of millions who think they can’t afford to save any money?

Chances are, you’re approaching saving in the wrong way – but if you want to get back on top of your finances, it’s important that you start putting some money away for times of need.

Those times of need occur more frequently than you might think too, in fact, around 75% of us will need a large sum of money at some point during each year – owing to an emergency situation that we could not foresee.

If you’re sick of seeing an empty savings account – or having to turn to friends and high cost loans when you’re struggling – see which of the following 6 tips might work for you and mean you can start putting some money away for a rainy day.

Make an achievable plan

Try to think of not saving as a bit of a bad habit – this way, you can set some little goals to change your ways. The key to changing your approach to something is to introduce it in an achievable way, notching up a little ‘win’. For example:

You set yourself a goal of saving £500 per month – within a few days you realise it’s not achievable and start using some of the cash you intended to save. Your head drops, you’ve missed your target.

Alternatively – you set a goal of saving £50 per month. You don’t notice the money missing and at the end of the month you’ve got £50 saved and potentially another small amount that’s left over to put on top of it. A win!

You don’t have to start big, whether it’s £10 or £1000 – it’s a step in the right direction.

Shift the cash quickly

You only have to look at high street shopping figures to know that, as a nation, we are more carefree with our money when we’ve just been paid. That big balance in the bank gives us a sense of financial freedom – even if it is short lived.

This is exactly the right time to put some money away into a savings account. Then, you only impact the more financial free time at the beginning of the month – rather than trying to stretch your more limited money resources when the month is coming to an end.

Reduce the cost of your debt

Debt is debt right? You pay it until it’s gone and pay off everything you owe.

If this is what you think – you might be in for a pleasant surprise.

Firstly, if you’re struggling with debt, there are companies out there who can help you reduce it down to a manageable level. Not all offer the same level of service though – so by checking out a site like Face The Red and an in depth service review like this one: 2017 Freedom Debt Relief Review (Most Recent Updates) – you can be certain whether or not the company you’re considering will be helpful.

It’s not just companies that can help though – being smart with your balances can prevent interest (and therefore increased levels of debt) occurring in the first place. Check for 0% interest on balance transfers with credit cards and loans – but make sure you keep a tight diary that will alert you when your low interest phases are about to come to an end.

Find a way to make a second income

A lot of people choose to have a ‘savings income’ – from which either all or some of the money they make is filtered straight into a savings account.

Perhaps you could do a part time second job when you have a few spare hours? Or take part in what’s being referred to as a ‘gig economy’ – where you’re paid for individual jobs or tasks you take on.

Don’t worry – this doesn’t necessarily mean you have to become an Uber driver or Deliveroo rider – there are plenty of second jobs that can be done from the comfort of your home – producing items to sell, offering your skills on freelance platforms, monetising you blogging or other online expertise – and so forth.

Again, save as quickly as you can when the money hits your account and you’ll start to see your balance build.

Use an app to understand your spending

We all know that small amounts add up to larger sums of money – but on a day by day basis, these bigger amounts are difficult to keep a running total of, which is why using a spending app can be an eye-opening experience.

With this kind of app, you log your spending on a daily basis – whether that’s scanning receipts, accounting for costs that come directly from your bank account – or just logging money that’s spent here or there.

Each amount spent is allocated a category – and normally these can be created just for you – for example, lots of people will have ‘fuel costs’ – but you might like to add categories that are specific to you, your life and your spending. When your spending data starts to build you’ll understand exactly where your money goes each month. Seeing how much money you spend on takeaways, smoking, socialising or your hobbies might make you want to reassess and start channelling some money into your savings instead!

Question all your outgoings

There are so many things we spend money on that just ‘tick over’ in our accounts without question – and there could be money locked up here that’s going to big companies – rather than your savings.

Get into the habit of questioning each of your outgoings periodically. The questions you ask will depend on what the money is being spent on, for example:

Insurance payments: Am I paying too much? Can I get a better deal elsewhere? Did I compare when I got a renewal?

Phone bills: Am I using all my allowances? Could I talk to my service provider and see if there’s something more suited to my needs? Could I shop around and find the same deal cheaper elsewhere?

Subscriptions: Do I still want what I’m subscribed to? Would I rather have the money in savings? Do I even use the service?

It’s important not to be complacent with the smaller amount of money – they’re adding up somewhere, you just need to choose whether that’s going to be in the account of a multi-million-pound company, or in your savings.

What’s Old is New: The Return of the Credit Bubble

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If you’re old enough to care about the contents of this article you’re old enough to remember the unnatural disaster that occurred in 2008-2009 commonly known as The Great Recession. That global financial meltdown, driven by an insatiable demand for easy credit, was only prevented from dragging the entire world economy into a black hole from which there would be no return by the unprecedented intervention of the world’s leading central banks. They printed trillions of dollars of new money and injected it into the system to cover bad debt, bail out huge banks and fund government takeovers of other financial institutions. In essence the West borrowed its way out of a debt crisis.

The Sweet Sound of Alarm Bells Peeling O’er the Land

Fast forward less than a decade to 2017 most of us are still not financially independent and you don’t have to strain to hear financial watchdogs once again sounding the credit alarm. Although the nature of the risk may be slightly different this time around (personal debt as opposed to credit default swaps) the tune is the same: we’re borrowing our way toward financial Armageddon.

Take for example household debt in the UK. In March British consumers added £1.6 billion to the good ship Personal Debt, a 10.2% jump over last year’s already bloated numbers and more people using debt solutions such as IVA’s for more information on this click here. In November 2016 that year on year increase was 10.9%, the highest since 2005 when the housing bubble was in full swing. If this were a new phenomenon it might not seem such a big deal. But coming at a time when the global economy still hasn’t fully recovered from the Great Recession it has more than a few experts trembling in their wingtips. Here’s why.

The Dangers of Easy Money

In the days leading up to the 2008 meltdown people all over the Western world were gorging on easy money: “No job? No savings? No collateral? No problem! Here’s a million dollars for that dream house of yours. Just be sure you flip it quick – and for a handsome profit – or our next meeting will be at the soup kitchen! Ha ha ha ha.” Of course it didn’t take much to blow over the whole house of cards and expose the fantasy island both lenders and borrowers were living on.

Again, while the problem today is slightly different in nature the dynamics are essentially the same. Consumers, seduced by historically low interest rates, are taking on more debt than they can reasonably be expected to pay back. All it will take to capsize the good ship Personal Debt today is a slight downturn in the economy or a sudden spike in interest rates. If one or both of those things happen millions of households will likely find themselves unable to even make minimum monthly payments and the dominos will begin to fall.

And there are already indications that pressures are mounting on the first few dominos. Staff at the National Debtline for instance report the 1st quarter of 2017 was the worst they’ve experienced since the dark days of 2009. While others are scrambling to find any sign of good news in what is an increasingly bleak debt picture.

The Changing Nature of Debt

Another difference between the nature of today’s credit bubble and that of 2008 is that this one is driven at least in part by consumers borrowing to cover essentials. And that by itself is more than a little frightening because it suggests that, not only have we not recovered from 2008, but we’ve now decided that borrowing is the only way to make up for the shortfall in that recovery. And if that’s true it can’t lead anywhere good.

As proof of this recently released figures indicate that both consumer credit and student loan debt are higher today than they were in the run-up to the 2008 meltdown and that 26% of household spending today is deficit spending. Compare that figure to the British government which relies on borrowing to cover about 15% of current expenditures; a figure many consider outrageous. In fact unsecured debt is now £11,800 per household; the highest it has ever been.

(Bad) Credit Where it’s Due

It has to be said that, while many in the banking sector today are raising red flags over the issue of consumer debt, it’s more than a little disingenuous of them to do so. After all, it’s not consumers who are printing credit cards at a furious pace and offering 0% interest on loans and the like. Only the banks can do that. People are just taking them up on their offer because they don’t see any other way to make ends meet.

On the bright side at least one bank (the Bank of England) has tacitly acknowledged their role in creating the problem by ordering a review of their non-business lending practices. However, while this is a necessary step in the right direction it will have to become the industry norm, and fast, if we’re to head off the new meltdown many see heading our way.

The Way Forward

Obviously one can’t build a sustainable economy on unlimited borrowing. As everyone should have learned in 2008 the debt chickens eventually come home to roost and they all want to be fed. Getting hold of the situation and instituting necessary changes won’t be easy but the alternatives are bleak and bleaker. So what are those necessary changes? Well, at minimum they look like this:

  • Wages need to rise.
  • Financial institutions have to reign in their lending practices.
  • Governments need to hold financial institutions accountable for reckless behaviour.

In spite of the increase in personal debt in March there are a few barely perceptible indications that consumers may be starting to exercise a bit more restraint. However, as of this writing these blips on the horizon have yet to coalesce into a discernible trend. The overall situation remains extremely worrisome and unless things can be turned around fairly soon most every economist worth their salt knows where they’re headed.

Solving your Debt Problems

Solving your Debt Problems

Debt problems have to be resolved as quickly as possible. Its urgency cannot be overstated as it certainly has a number of serious and long-lasting consequences. It can affect not only you but your family as well. Of course, you may have realized it by now but we have to emphasize it here.

Making a Budget

There is no other way to get out of debt than to dig yourself out of it, slowly and steadily. To do this, you will need to make a monthly budget. Keep in mind that you have to maintain a certain level of discipline during this period and follow the budget as best you can.

When making a budget, make sure to set aside a certain amount for debt repayment before anything else. Try to limit your expenses on any luxury items. Stick to the bare essentials for a while and you will soon solve that debt problem in no time.

Readers need to understand that this is no walk in the park. Getting into your debt problems is certainly much easier than getting out of them. However, we are not saying that it is altogether impossible. You just have to act decisively and stick to your own game plan.