Putting Your Saving On Auto-Pilot

It’s great when a year ends, isn’t it? It gives you the opportunity of closing off one year and looking forward to a whole new year to come, brimming with opportunities and possibilities. Out with the old and in with the new. Right up there amongst our many resolutions is saving more.

Ever heard of “out of sight, out of mind”? Believe it or not saving money is a lot like that.

• Many people tell themselves, “I can’t save because I don’t earn enough.” Linking income and the ability to save. The belief goes like this, the more money you earn is the more you save. Not necessarily! People with higher incomes have more expensive lifestyles with more pricey toys – a nice laptop, a nice car, flat screen TVs, etc.

• To examine if there was a correlation between life savings and income, a study was done by two economics professors – one from Harvard and one from Dartmouth. The study involved 4,000 households near retirement and the results were surprising. They found that income has nothing to do with savings. Income only explained about 5% of the net worth of the households studied. A huge variation in wealth at every income level was found. While many low-income families had almost nothing, the same was true of many high-income families. Ever heard about those who win the lottery but end up broke?

• Income alone doesn’t explain wealth disparities. Some of the lowest earning households had managed to accumulate significant wealth.

• Chance events such as inheritances, medical bills, marital status and number of children explained about 4%, investment choices explained 8% and 75% was attributed to just saving money.

• If you can have a certain percentage of your income go automatically to savings (as in out of sight, out of mind), the battle’s already half-won. How much you make doesn’t matter as much as what you do with your money when you get it.

• Put your savings on auto pilot and change your financial future forever.

Why You Should Invest Your Bonus

A YEAR-END bonus payment is given to employees based on their performance and that of the company. Most firms operate on a bonus system, providing employees with huge bonuses in highly profitable years and little or no bonuses in lean years. Many salespersons also operate on a year-end bonus system, in which they receive bonuses if they met or exceeded certain sales goals during the year.

Many persons usually view their bonus as the extra spending money and it can be blown with a few days of shopping.

However, wealth experts agree that bonuses should be seen as additional savings and invested in order to gain high returns for the new year. A bonus is not a regular part of your income; it is a payment for your creativity and you should be creative about how you use it.

There is nothing wrong with spending some of your bonus on yourself. After all, it is a reward. However, like your income, a part must be put aside to continue earning on that reward for you.

A good place to put your bonus is towards an emergency fund. It will seem as if you are not using it for much, when if you should put this money aside at the end of the year for unforeseen tragedies in the new year, you can rest assured that you can cover your expenses.

Another investment option is a fixed deposit account. A fixed deposit account allows you to deposit your money for a set period of time, thereby earning you a higher rate of interest in return. Fixed deposits also give you a higher rate of interest than a savings account.

You can also use your bonus to reach a big goal that seemed distant before. Such goals as continuing your education, buying furniture, paying deposit on a car, clearing up a few debts, and so on, are great ways of using your extra money.

A retirement savings plan is another option. It does not matter how young you are, it is never too early to start planning for retirement. Visit a few banks and investment institutions and compare different investment schemes. The earlier you start to save, the earlier you can reach your goal of retiring a few years sooner.

Of course, your extra money should be diversified and invested for the long term as a bonus this year does not guarantee one next year.