Build Your Savings Account – Make More, Spend Less

Build Your Savings Account – Make More, Spend Less

 

How to Save More MoneyHi Rich Mama – today we’re going back to the basics of financial planning.  It’s all about step one of your defensive plan for building a wealthy family. You have to save. You will never become wealthy – no matter how much you make – unless you are saving money! But so few actually have a regular plan for saving. That old adage that those who fail to plan, plan to fail, is never more true than where money is concerned.

 

Without a solid savings plan, chances are, you’ll never have enough money on hand to provide for your family in the event of a financial set-back. Reaching long-term financial dreams such as a secure retirement also depend on a savings plan.

 

The best way to protect your family from financial disasters is to have a plan in place to prepare for the future. Building a savings account requires learning to make more money and live on less. These two strategies will go far toward ensuring that – heaven forbid – a financial disaster strikes. Your family will be able to survive and more easily bounce back from the hardship with a firmly established savings account. A savings account will help you sleep better at night – much better than a garage worth of junk or a closet worth of shoes.

 

Let’s look at these two strategies that will help you build a savings account, and build financial security in the doing:

 

Make more money.

 

You can try and earn some extra money and put that in your savings account. Spend the rest of your money guilt free. If both you and your spouse work, this is a great test to see what would happen if one of you quit (or lost) your job. Try living only on one income.

If you’re already a one income family, you can try and earn a bit extra on the side and devote this to saving.

You can start a home-based business offering services such as lawn care, babysitting, tax preparation, sewing, baking, music lessons, or anything else you can do reasonably well. Start by talking to your friends, family, and neighbors about your new venture, then branch out when you get your business firmly established. DO NOT SPEND A LOT OF MONEY STARTING THIS BUSINESS. If your start small and only earn a hundred or two hundred bucks a month that you SAVE – pat yourself on the back.

If you like to sell, you can sign up with any number of direct sales companies. Some familiar ones are Avon, Stella and Dot,  Home Interiors, and Arbonne, just to name a few. There are hundreds more with products ranging from baby toys and books to weight loss assistance. Choose something you like, and that you believe in, and give it your best shot. Avoiding ones that have you buy a lot of inventory upfront.

 

Selling your own products or unwanted items is another way to make more money. If, like most of us, you have a garage, basement, or closets full of things you no longer want or need, turn those items into cash. Declutter your life and build a savings account at the same time. Explore online auction sites for ideas about what people are looking for and get on the bandwagon. Or just have a good old fashioned yard sale and make a commitment to put that money into your savings account.

 

You may enjoy crafting. Could you build an inventory and take those items to a local art fair or flea market? Perhaps setting up an online store would be more to your liking – try Etsy.com so you don’t have to go through the hassle of building a website from scratch.  As much as you enjoy creating things, there are even more people who enjoy buying things. Why not sell them YOUR things?

 

Spend less money.

 

Make spending less money a habit, even a challenge. See how many outfits you can make out of the clothes in the back of your closet; see how many meals you can get out of one whole chicken, etc. Put the money you would have normally spent into a savings account. Avoid eating out. One less take out dinner a week could mean a hundred dollars or more a month in your pocket – I mean savings account.

 

Coupons are an easy way to track how much money you save when you shop. Take the amount on the coupon and physically deposit that amount into a regular savings account. Nickels and dimes can add up quickly when this is done consistently.

 

Keep a small notebook and track every cent you spend. Within a week, you’ll notice a pattern of unnecessary expenditures. Eliminate that gourmet coffee on the way to work and replace it with a home-brewed alternative. Fill a reusable bottle with filtered water out of your own tap instead of buying bottled water. Make your lunch at home. Whatever you save over the weeks, take that money and stick it into your savings account.

 

Eliminate luxuries in order to build your savings even faster. Find a cheaper hair salon, go a little longer between cuts. Do you own nails.  Go to the library for books and moves.

Whatever you choose to do, however you choose to save, start today. Put aside a little money from every paycheck, spend less, and earn more so you can build a savings account to protect your family in the event of a financial disaster. You need a buffer against layoff, recession, depression, or long-term illness to ensure your family’s security.

Your Questions About How Do I Get Out Of Debt Free

Chris asks…

How can I become debt free and more responsible in 09?

I am trying to start the new year off right. I want to get out of debt and become more responsible when paying may bills. I am in the process of paying of mybankruptcyy. Does any one have useful suggestions for me. Or a system that seems to work for them?

richmama answers:

The old tried and true…..

Unless you can pay cash for it… Dont buy it…

It will keep you out of debt, and save you a FORTUNE in finance charges…

Donna asks…

What or how is a best way to get out of complete debt?

I am at lest $20,000 dollars in debt. This includes credit card, payday loans, and a student loan. Yet! I‘m confused as to what is debt consolidation and how is works. I‘m disabled and on a monthly fixed income anyway. How does debt consolidation work? What are the pros and cons. What are my options at this point. Anybody got any suggestions-only serious and helpful answers are wanted. I just want to be debt free. Can anybody help me.

richmama answers:

You don’t mention a mortgage. Does that mean you don’t own a house? Honestly, if you own no assets and you are not working… No legitimate company is going to give you a consolidation loan right now.

The good news is, $20,000 is not that much debt, by today’s standards. It’s not impossible for you to just pay off this debt if you seriously reduce your other costs. Take a good look at your expenses and cut, cut, cut. Maybe you need to take in a roommate or cut the satellite tv. Every penny you can save, you put it toward debt reduction.

Which loan has the highest interest rate? The payday loan, I’m guessing. Continue to make minimum payments on the credit card and student loan, but throw all your extra money toward the payday loan and get it paid off first.

Once you pay off that loan, dedicate all the money you were paying toward the payday loan and start paying down your credit card. You will start to see those balances go down.

Michael asks…

How can I get out of my £115 debt?

I have a written contract with a company that takes £17 a month from my bank account and because my bank account is overdrawn the company keeps charging me. My debt is slowly sprialling out of control, I cannot find a job, Please Help what can I do to be in the debt free zone again??

richmama answers:

Can you toss this contract or end the service? It seems to be at the heart of your troubles.

Donald asks…

Tips on starting a debt free life?

hey, i‘m 16, and i‘m going to be looking for my first job soon. and i‘ve seen how hard its been for my parents with debt. and I know that many people live with debt. so I want to live as debt free as possible.

What are key rules that you would say are essential for having a debt free life? Also, if you are in debt, what are the best strategies to do to get out of debt?

thanks!
hmmmm…emergency fund? that sounds like a great idea!

richmama answers:

Don’t have a debt free life because you are afraid of debt. Debt is a tool. It must be used wisely. You would not use a blender to hit nails into floorboards. You would use a hammer. Debt is like a blender. It’s good for one or two things, but not everything. Use it wisely, and you will benefit greatly.

Firstly, you should save at least 10% of your income. Firstly, this should go towards an emergency fund, which, when you’re an old boring grown up like me, stops you resorting to credit cards and personal loans in emergencies. After you have a few hundred in the emergency fund, it’s time to start investing. Don’t be afraid of investing. You should go to the library and get some books out on personal finance. At 16, you’re smart enough to understand them. And talk to your parents. They will firstly be thrilled that you’re so mature, and secondly, they might be able to give you some advice or help you start investing.

You should have a bank account for savings. When you get some cash together to invest, your first stop should be a term deposit at the bank. For small amounts, this is the best. It will give you terrible interest, but better interest than what you’ll get on a normal account. It locks the money away. I’d lock it away in blocks of $100, so if you do need it, you only have to cancel one term deposit (which means you lose the interest) and you still earn interest on the others. When you have a few thousand, you can start investing in mutual or managed funds. Go to your bank and see if they have a financial planner you can talk to once you’ve saved a few thousand dollars. They can help you invest it wisely.

Use debt to only buy things that increase in value. For example, houses, and perhaps, if you’re very careful, good quality shares. Never buy anything else with debt. Never buy cars with debt. That is for morons. Save up and buy a car. Debt can be dangerous.

While I say that, it can be useful to have a credit rating. When you’re 18, apply for one credit card. Never apply for multiple cards if you’ve been turned down. Every time you apply for a credit card, it goes on your credit history and makes it look worse. So get one card, after you’ve shopped around to find the best one for you. Use it to buy one predictable expense a week, like groceries or fuel for your car. Then, repay it as soon as possible, with an extra dollar, so that the lenders know you’re a good risk. That will give you a great credit rating, so when you’re ready to buy a house, you’ll get a good rate on your home loan and save yourself thousands of dollars.

Don’t be afraid of debt. But don’t be blase with it either. If you buy a house, save at least 20% of the purchase price as down payment, and some extra for costs like building and pest inspections, taxes, etc. When borrowing for a house, a big deposit gives you ‘instant equity’, so you own more of the house, have less to repay, and can repay it faster. The faster you repay a debt, the less interest you pay, which saves your money.

I started at your age. I invested $6000. Ten years later, it was worth $18 000. Instant house deposit. With some other savings I had, we had a 30% downpayment. We are paying our homeloan off in 5 years, which will save us hundreds of thousands of dollars in interest. It is saving us at least the same amount we paid for the house. If you pay a mortgage out to the 25 years, you pay mostly interest. You normally pay double what you have borrowed over the term of the loan. But if you repay it fast, the money doesn’t sit there and earn interest for the bank. You cheat the bank out of their interest. Better in your pocket than theirs.

If you do find yourself in debt, pay it off as fast as possible so the banks don’t make money out of you. If you have lots of debts, find out all the interest rates, and make the highest interest rate debt the priority. It needs to be paid off first, while you make minimum repayments on the others. When the highest rate debt is cleared, move that money onto the second highest, and keep doing this until you’re debt free. That is the cheapest and quickest way to clear your debts.

I’m an Australian. Our Tax Office LOVES people investing their money. If you buy shares, often the business has already paid tax on those share earnings, so when you get your earnings, you get a tax credit. It’s great. So do some reading at your library on what sorts of investments there are, and what kinds of debt there are, and then you’ll be well armed to be an adult. Don’t worry about the hard stuff like tax breaks. Just learn about the different things you can invest in, and try some. Mutual funds (managed funds in Australia) are good for beginners, because they spread your risk over lots of companies and asset classes. You can usually start with a few thousand dollars.

If you’re an Australian, the best book I can recommend is “The Barefoot Investor” by Scott Pa

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Your Questions About How To Pay Off Mortgage Faster

Mandy asks…

Paying off your mortgage faster.?

I have been researching how to pay off my 30 year fixed mortgage faster. I have found a lot of information on paying one extra principal payment a year. what if I were to make four extra payments a year? Would I get close to a 10 year payoff?

richmama answers:

Depends on the interest rate and the term left in the loan.

Daniel asks…

how can i pay off my mortgage fast without changing any of my current spending habits?

I have been looking into this HELOC (Home Equity Line Of Credit)plan. Which is: You open a HELOC, which is a revolving account that comes with a debit card and a book of checks. Say your home is worth 80,000 and your current balance is 75,000. Well, you can get a HELOC of 5,000. You dont spend this money. You just leave it where it is. This is where it gets interesting. When you get paid you start using this HELOC account as your checking account. Say you get paid 2500 every 2 wks. When you make your deposit of 2500. Your daily periodic balance that you will be charged interest on is going to be 72,500. As you pay your bills and living expences for that 2 wk period you may only have 500 dollars of the 2500 you put in. This will leave you principle at 74,500 for the remainder of the 14 days of intrst . You get paid again. Put another 2500 in this account. You again leave 500 in, and you make a house payment of 700. Which has been in the account the entire time anyway. Will this work?

richmama answers:

The HELOC usually has a much higher interest rate than your mortgage- around 8% or so…

Instead try taking any extra money that you have and putting it into a mutual fund… Over time it should grow at a faster % rate than your mortgage interest rate, so you should be able to pay it off earlier than if you’d just sent those extra monies in on the mortgage right away.

John asks…

Is it really possible to pay off my 30-year fixed rate mortgage in 5-7 years?

I saw a so-called expert on a news broadcast this morning who said people in Australia and Europe have discovered a way to leverage their debt and finances in order to pay off their home mortgages at a faster rate without changing their monthly payments. How is this possible? It was quickly suggested that a Home Equity Line of Credit (HELOC) was the secret, but what does getting more debt have to do with eliminating debt?

richmama answers:

Yes, it’s possible. But it may not be advisable.

A HELOC is the secret. Without getting into the details, you’re not borrowing more money. You’re using the HELOC like a checking account, shifting money (from your paycheck into it), then paying the mortgage out of it. And the sophisticated software that you pay for also tells you when to make additional contributions.

The systems I’ve seen cost something like $3,500. The argument is that you’ll save that much in interest in the first year. And maybe you will. But it is expensive up front. The only real requirement (other than perhaps your ability to obtain a HELOC in today’s credit environment) is that you have a monthly positive cash flow…that your income is exceeding your expenses. The numbers don’t work if you’re going into debt every month.

You can accomplish something sort of similar–not as efficiently–by making extra principal payments on your mortgage every month. Like I said, the program I’m familiar with is a lot more efficient, but it’s pricey.

Hope that helps.

Paul asks…

pay off mortgage tips?

i have two mortgages on is in foreclose and the other one isnt how can i pay off my mortgage that is not on foreclose faster and will it affected me if i have one of foreclose. will the forecloser company get after me for not pay that one and paying of the other mortgage. and i also dont want the house that is on foreclose any more because i owe more than what the house is worth currently trying to sell that house. what do you recommend

richmama answers:

Your question is very confusing and not clear… But here we go anyway!

It sounds like you own two houses and have two mortgages (one mortgage on each house). One of those mortgages is in foreclosure (for a house you no longer want because you owe more than it’s worth). The other mortgage is current (in the house you are living in and want to keep).

Mortgages, in general, are secured debt. They are secured by the house that you bought with the mortgage. It is not standard to have any further rights in a mortgage than foreclosure (it can happen, though). About the only way they can come after you is if they can prove that you were trying to cheat them when you got that mortgage (fraud).

If you let the house go to foreclosure, your credit will be absolutely trashed for several years. You might want to see if you can negotiate a short sale on that house (with that lender). A short sale won’t trash your credit like the foreclosure would.

I recommend a short sale on the property you don’t want.

Make an extra payment per year on the one you want to keep and pay it off up to 8 years early.

Good luck!

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