It is easy to think that you can’t start saving money when you have debts to pay and regular bills to keep up with, but where there’s a will there’s a way.
All that is needed is a change of mindset and a greater understanding that even saving small amounts of cash each month can soon add up to a decent sum over a period of time.
Here are some tips and strategies to help you start a savings habit that could change your future. There is a look at how to decide when to clear debts and when to save, an example of why paying off your credit card is a smart move, plus some tips on finding extra cash by shopping around.
Finding a good balance
The secret to getting your finances into better shape revolves around finding the right balance between paying off your debts and saving some money for emergencies and long-term future plans.
If you are unsure about whether you can even justify saving money when you have debts to pay, there are a couple of key clues that indicate whether you are ready to get into a regular savings habit.
If you are up to date with your monthly mortgage or rent payments, paying your credit card bill each month and don’t have loans that are costing you more in interest than you could earn on your savings, the good news is that you are in fine shape to start putting money away each month.
Clearing debts is a priority
It would be fair to say that if you are currently managing your debts and putting money away into savings each month, the solution is right there in front of you.
It can actually make sense to use your savings to pay off your debts or allocate your monthly savings towards prioritizing clearing your existing debts. If you think this is a daft idea and you prefer the idea of having some savings behind you, you might want to gloss over the following example.
If you had a £2,000 credit card debt and the current APR is 18% this is costing you £360 in interest charges for the year.
£2,000 in a typical instant-access savings account will be earning you about 1.5% interest at best, meaning that you are going to earn £30 in the year.
You don’t need to be a maths genius to see that clearing your credit card balance with some of your savings is a no-brainer and is going to make you £330 a year better off in an instant.
You can see that clearing expensive debts as a priority could be viewed as a decent savings strategy as it gives you more money to invest in the long run.
Find more money
If you want to try and pay your debts off and save some money too, a good way to try and achieve this aim would be to find some extra money through other potential savings on your regular commitments.
Try looking for cheap insurance deals when your current policy is up for renewal. It is almost always going to be the case that you can find a lower price when you shop around rather than just accept the automatic renewal quote.
Every cheaper deal you find for your mobile phone, utilities, broadband, and anything else you pay regularly for will free up more money to help you develop your savings habit and improve your future financial outlook.
Isobel Carter enjoys sharing her tips and thoughts on money around a selection of blogs. She works in banking and is a Mother of two pre-teen girls.
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