September 7, 2019Saving & Investing
What would your 72-year-old self do right now? If the answer is 'whatever', then great, but how are you going to pay for it? You'll eventually get older and need money to live. The secret is to look at how you think about money and study your day to day habits around money.
- Every pound you make and spend is part of the bigger picture of the economy - Your spending, as well as other people, is what generates the value in our economy. It's not the banks or the factories.
- How much of what you keep from what you earn, and what you do with it, is your own personal economy - You have complete control here.
- There are lots of competition for your attention and money - Companies that target you with their advertisements are competing and fighting for your attention, so you ultimately spend more.
- Consider how you spend.
- Save with a strategy – Banks can be safe places to save and store your money, but it's not a strategic way to save. To save strategically, consider three different goals for your savings, namely, emergency savings, long-term savings and short-term goals.
- Emergency savings - For emergency reasons, it's important to have accessible money. The rule of thumb is to have three to six months of savings that you can access in an emergency.
- Short term goals - Saving for a vacation, upgrading your computer, holiday gifts, etc.
- Long term savings - This is the money you need to build the future you want. You can also call this 'investment funds'.
- Choose where to save and think beyond the bank to make your money work for you - Remember, your money is a powerful tool, but by it sitting in a bank doesn't do all that much for you. It's perfectly fine to put your money in the bank for emergency savings and short-term goals. However, it's important to know, with regards to long-term savings, that you're aware of the potential inflation. Therefore, it is important to know, investment helps the value of your money increases as inflation goes higher in the long-term.
Summary: Whether it's looking after your personal or local economy, spending and saving your money with a strategy is crucial for a better financial future.
Improve your credit score as this helps to pay lesser interest in the long-term.
- Paying the least amount possible in interest should be one of your life long financial goals: To do that you need to make sure that your credit score is as high as possible.
- Track your credit score history - Using online platforms that help you track your credit score in the easiest way possible. One of the ones I use called www.clearscore.com.
- Never miss a payment - Missing payments significantly reduces your credit score. Set up a direct debit and pay your bills, credit cards or loans every month without fail.
- Have different types of credit - Car loans, mortgages, credit cards, but you need to pay them back.
- Use only a small amount of available credit - The best scores go to those who only use 20-50% of their available credit.
- Never cancel a credit card - Reducing your available credit never looks good and can affect future credit lines.
- Pay your credit cards more frequently - Make payments multiple times a month. E.g., paying once a week will help with your credit score.
- Ask to increase your credit limit and don't use the extra credit - It won't hurt your credit limit if your credit issuer says no.
- Watch for spikes in your credit - If you hit your credit limit, then this looks bad, so if you have a large purchase on your bill like a plane ticket or you have a direct debit on your credit card, then move money onto your credit card before the charge hits, as it will keep your balance from spiking.
- The longer your credit history, the better.
- Limit your credit inquiries - If you apply for a lot of credit, but don't get it, it may affect your credit score, so ask for credit carefully.
- Get a secure credit card - One thing you can do to raise your credit quickly is to get a secured credit card. If you have spare cash, you can put it down as security against the credit on the card, so if you give your bank £1000, they'll hold the money and give you a £1000 credit limit on a credit card. To the credit agencies, it looks like you just received a new credit card, resulting in a boost to your credit score.
Summary: Your credit score matters a lot & the quicker you realise that, the better. The difference between the lowest scores and the highest scores can be as much as three times the interest rate, which, for things like a mortgage, a lower interest rate adds up to a tremendous amount of your money/savings over your lifetime.