The Art of Saving

The art of saving …. explained:

1) Set a monthly savings target. Use a percentage of your income so that your target will increase as your earnings increase
2) Make saving easy – have your savings automatically deducted from your salary. With this direct deposit option, you remove the temptation to spend
3) Be consistent. As your savings accumulate, so will your interest and the compounding effect will accelerate your earnings.
4) Maximize your returns – review your savings account regularly and trade up to longer term, higher yield instruments at times. The type of investment instrument that you choose will depend on your stage in life, and risk profile …. thus, seek professional financial advice.

Building Your Cash Reserve

Open any newspaper or go on the internet and no doubt you will see something about the economical turmoil that we are facing. A steady diet of depressing news is on the menu and one can feel like there is no way out.

But that is just a feeling. The reality is you control your reality. Who decides on how much money you spend each month? Who decides whether you should go back to school and improve your skill sets? Who decides on the type of car that you drive? Who decides when you are going to use your credit card? Who decides if you are going to pay more than the monthly minimum on your credit card to save on interest charges?

And while you are still contemplating to the answer above, we can also say that one fact of reality is that it is unpredictable. Emergencies occur, expenses pop up out of no where, and investment opportunities present themselves. Yes, even in this economy, there are investment opportunities – if you look around and are in a position to act.

And that ladies and gentlemen, is the rub. Are you in a financial position to seize investment opportunities? Can you pounce on deals while being prepared for life’s unpredictable events?

If the answer is “no”; if you feel like a victim of the economy, then it’s time to do something about it. And really, it is all up to you. We have already discussed the security blanket of insurance that covers death, health, disability and the like. The next step in financial empowerment is a cash reserve.

The financial experts say that you should have six to eight months your living expenses in cash put down. This will tide you over and give you peace of mind, especially in this current situation we are in.

Many will question – how can I save when I have so many bills, so many expenses that I have to meet? Well the simple answer – and most difficult implement – is to treat your saving goal like any of your other bills.

1. Review your spending habits – be ruthless and cut out what is simply not necessary.
2. Set up a salary deduction for 10% of your salary – out of sight, out of mind.
3. Direct your savings bill to an instrument that pays interest. Let the money that you a putting away earn something. It doesn’t make sense for your investment to simply sit there and not grow or earn a very low rate, especially given where interest rates are low.
4. Do not touch the money!!! If you are drawn down on it, how will it protect you later on?
5. Once you reach your savings goal, it is time to consider investing in opportunities for the long term.

When you are feeling helpless in the face of economic turmoil, it is easy to rationalize not saving. But that is really giving away your control to others. So, speak to your licensed financial advisor about ways to manage your funds so that you can build your emergency funds and manage the economic storm that we are in. Building a cash reserve is an important investment in your future.