Why we should all be saving more money in 2016
What would you do if a crisis occurred in your life and you suddenly needed a lot of money? In particular, what would you do if you already owed a considerable amount, thus squeezing the possibility of borrowing further? It could be anything – a new car, theft from the home, redundancy/sacking… these are often the scenarios that people always say will never happen to them, which makes it all the more crushing when the worst does occur.
These circumstances, usually tragically too late, are the biggest adverts for keeping a stash of money in reserve. If no emergency arises, then save it for a rainy day or a present down the line.
These are personal circumstances, but other, bigger moves may also affect our lives in 2016. Would, for example, an exit from Europe affect the country’s finances, and if so might our government pass on the buck to us all, or would regaining our borders and laws be beneficial? The vast majority of us cannot affect these changes, other than voting on June 23, but we could at least save a few pennies for either scenario.
Similarly, what happened if something occurs that is totally out of our control, such as natural disaster? Communities in Cumbria are still reeling from the devastating floods across Christmas and the New Year, and disaster appeals, while well-meaning, cannot possibly aid all of them.
For the young, buying a home is becoming more of a pipe dream. For example,
according to the National Housing Federation the average Londoner needs a 266% pay rise to afford a home in the capital. Around the country people in their 20s and even 30s are living with their parents, because they simply cannot afford to move out. These are the conditions that people face as they try to clamber onto the property ladder, and the best way to at least give yourself more of a chance is to save up a sizeable deposit to convince a lender. Similarly, the car or holiday that you want will more likely be yours with a sizeable down payment.
The first step is to highlight any issues with your spending. Do you manage your money wisely? Do you have good financial habits? Click here for this useful tool from PayPlan which will help you to assess your money management.
Once that has been established, the second step is to begin tackling your debt. Make an effort to pay off any higher interest accounts first. A good strategy is to set up a standing order to work at about the same time you get paid, so that the money comes out before you even know that it has gone. If there are several accounts and you’re losing track of payments, consolidate them into one; loans usually have a lower interest rate than credit cards and store cards.
When the loans are gone and you are debt-free you can start building up money. Even though the interest rates are not what most people would want for savings accounts, feeding a regular compound interest savings account is a cumulative process where interest builds upon interest, and you can see your money grow. Be wiser with your spending, analysing money spent on luxuries and other superfluous items, and if possible channel the money into your savings accounts.
It’s a real achievement to be able to say that you have given yourself a chance of financial success through hard work, but follow these steps and it will not take long before your finances take on a new, healthier complexion.