Savings made simple

Boosting your savings

Disclaimer: I am aware that many of my references are suited to a UK audience however the process still works for anyone living anywhere else in the world. However the links will be less useful to you.

Why should I save?

If you are ever going to make your millions, serious savings is key. Forget trying to win the lottery (there's more  chance of you getting run over than you actually winning), forget gambling, forget your hopes of becoming famous by appearing on Big Brother. The surest way to become a multi-millionaire is to save. It's slow but it should guarantee your success. I have always thought that the mantra "slow and steady wins the race" was too oxymoronic (how can the slow person ever win the hundred metres!) to be serious but I think in the case of saving, it fits.
Now, by saving I do not mean that every now and again you put some money aside, nor do I mean for you to put every two pound coin in a jar. Saving should require a substantial portion of your income. It requires dedication and the ability to commit to a certain amount monthly.

With which Savings Account?

Before you can even start to think about saving you need to make sure you have the right bank account. Ideally you want to shop around every year or so for the best current account, paying the most interest or giving you the most benefits. We could all do with shopping around a little more when it comes to money as it adds up over the years. Then you need to attach a monthly savings account to this. Most banks will allow you this option to commit to taking a fixed amount out of your current account each month for twelve months. Of course, you can and you should always try to add more. If for any reason you've reached the maximum limit for your monthly saver, consider some of these savings accounts: Top Savings Accounts in 2012. Make sure you set up a direct debit for this monthly excess amount of money to come out of you current account.

Monthly savings, Really?

As you can hopefully now see, the ideal way of saving is to take money out of your account before you've even had a chance to spend it. Don't wait to see what you've got by the end of the month, you'll have spent it by then!

How much should I save?

I believe that everyone (excluding those with large debt-I will come onto this another time) can afford to save 20% of their NET income and net of anything you put in a pension (ASIDE: I will say a little more on pensions another time, however, to keep things simple you should aim to top up your pension as much as possible especially if your firm will match it. It's free money!!! You'd be mad not to take it). Some bloggers like Invest It Wisely advocate that if possible as much as 50%. Personally I find this too difficult. I would recommend starting at 20% and seeing if you could increase it over the years. One possible way of increasing it could be to commit to contributing at least 50%-80% of any pay rise allowing for a natural growth in the amount you save each month and still allowing you to enjoy some of you pay rise.

Use your ISAs (for a non-UK reader the same applies for any tax-free savings vehicles)

Make sure that you take advantage of your tax-free ISA (Independent Savings Account) allowance. You can invest in a cash ISA up to £5,340 before April 5th 2012. Follow the link for the best cash ISAs. This is a great way to avoid capital gains tax. If you have anything else left over invest it in an Investment ISA. You can also top this up with £5,340 and it is also totally tax free so use it.

This was just the basics of saving made simple. As you can see there's a lot more ground that I'd like to cover in later blogs. Feedback would be most welcome.

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