I don’t think that anyone would argue that there are many good reasons to save your money, especially in today’s climate.
No one truly knows what tomorrow will bring and having an emergency fund put to one side as a contingency for the unknowns that life will no doubt throw at us is something that we should all attempt to do regardless of our income.
The Money Advice Service recommends that you have three months worth of essential outgoings available in an instant access account as an emergency fund.
While having a three-month emergency fund is a good general rule of thumb, they also suggest that if you have more than six months worth of savings you should consider alternatives to make sure that you money actually works for you.
#1 Make your money work you
Warren Buffet and George Soros didn’t become billionaires by sticking their money in a savings account with a local high street bank earning minimal interest. They became billionaires by taking calculated risks.
While some look upon the rich with envy, I think that there are some important lessons that we can learn from them.
As the saying goes money goes to money and while this is true, it is only a that way because the rich are prepared to take calculated risks with their money.
Whether it’s a stocks and shares or property there are many ways that you can make you money work for you too.
For the past two months I’ve been putting into a stocks and shares ISA, and as I write this I’ve made a grand total of £1.50, not great gains and come back tomorrow and I might have lost the lot. Like any investment stocks and shares ISAs fluctuate based on the amount of risk that you are prepared to take.
Don’t think that you are going to become rich overnight, investing in a stocks and shares ISA or property is a long term strategy and certainly not for the fainthearted, risk averse or those that can’t afford to lose their investment.
#2 Start another income stream
Whether you are looking to increase your income by a couple of hundred pounds a month or even more, setting up another income stream is something that you will have to seriously consider, but don’t forget the tax man.
It is going to take a lot of hard work but the potential rewards are there for the taking if done right.
The great thing about setting up another income stream today unlike in years gone by, is the fact that you can now start one with only a small initial capital.
The options available to you include:
- Starting up a blog and accepting sponsored posts and affiliate marketing
- Rummaging around your house or charity shops and selling on eBay
- Becoming an Amazon FBA seller
- Starting a part time business, such as pet sitting or dog walking
- Creating an ebook
- Selling your photos on sites such as Shutterstock
#3 It can take over your life
Seeing your bank account increase every month can become addictive, believe me, and wanting to see it grow is only natural especially if you have an addictive personality.
The thing is wanting to see your bank balance grow can unfortunately takeover your life.
When you let saving money become all you think about you let NO become your go to answer for opportunities that could potentially change your life.
While you are trying to build an emergency fund there’s nothing wrong with saying no. There are always going to be temptations put in front of you, whether its your friends trying to get you out for a night on the town or if you’re into your gadgets, your favourite manufacture releasing a new product, that you simply can’t live without
What I’m really talking about are the things that actually matter.
What if your partner wants to start a family, get married our go on that once in a life time holiday, are you going to put an increased bank account ahead of these?
When NO becomes your go to for these life changing events, you have to seriously consider whether you’ve gone to far with your savings goals.
#4 You can use it to help others
There’s no better feeling than that of giving something of yourself to someone else, be it time or money.
Understandably some have their doubts whether charities deserve the donations they receive.
According to Channel 4, the average boss of the top 100 charities is paid £225,000 a year and of these 14 of those charities paid their highest earners more than £300,000. To put this into context the Prime Minister is paid £150,402 a year, but that is exclusive of the other perks of being PM.
This shouldn’t deter you from making a donation as there are still those charities out there that still deserve our support.
I’ll personally never give to a charity that ask for your bank details on the street and still don’t understand why some charities think that they are a good way of getting people to donate.
#5 You deserve to treat yourself
You don’t have to go out and buy that car that you can’t afford but a reward now and then shouldn’t be something that you deprive yourself of.
Even with an emergency fund there shouldn’t be anything stopping you putting money to one side to buy something that you really want.
Whilst you might ask why anyone would put money to one side if you already have the money to buy what you want outright, the simple answer to this is delayed gratification.
Another benefit of delayed gratification is that it gives you something that I believe is important in your decision to spend on anything regardless of the cost, time. Time allows you to research the product, maybe highlighting better or newer alternatives but actually suit your needs rather than buying something just because everyone else has it.
If you’re still unconvinced about the power of delayed gratification and you haven’t already I would suggest that you click the link above. There are a number of benefits to delayed gratification, not only in your financial life but in other areas such as work, life and health.
Even if you can only put a little away each month, do it. You never know what is around the corner, but don’t let it be your only focus once you have managed to build an emergency fund. Do what you can to try and increase your money outside of savings and hopefully the five items above have given you some ideas how you can do this.
While having savings are important, getting the most out of your life shouldn’t take a back seat as a result.