Save yourself rich

This week in the UK as part of George Osborne’s Budget, a new ISA called a “Lifetime ISA” was launched. The new ISA would enable you to get a 25% bonus on everything you saved up to £4000 a year. So you can get an extra £1000 per year in your account plus interest, from next April until you are 50. There are of course a few bits of small print, the big bits of which being that you only get these bonuses if you use the money towards a house purchase or your retirement.

My wife went through the numbers and projections last night and if we changed the way we saved and kept to the plan she made, we would have a very nice nest egg for retirement through this scheme. The thing about this new ISA is that I can’t think of any other savings method that is completely risk free that would give you a thousand pounds plus interest for a £4000 contribution.

What you save not what you earn

I am a big believer that life isn’t about how much you earn it is about what you spend and what you save. The amount of money you earn only makes you rich if you use it wisely. My wife and I make a great team for many reasons but one of them is because I am good at getting good deals and finding things for very cheap prices and she is great at saving, planning and budgeting. The combination between spending and saving is so important; if you do both well, you will have a great financial future.

I think when looking at savings, the important thing to do is to not look at the amount you are saving this month and how much money you make on your savings this month. You need to look at what the numbers look like if you keep saving that amount per month for 10 years, 20 years and so on. It is the numbers you will see then that will give you the incentive to keep on investing your small amounts every month. It’s like looking at your monthly direct debits, if you manage to get a new phone contract that is say £10 less a month than your current one it may not seem much, but if you look it over the two years of the contract that’s £240!

Working for you

Always make your money work the hardest it can for you – I hate this terminology but it is very true. Look at what savings options are open to you and pick the best ones for your needs. We are always being encouraged to shop around for best deals on insurances, energy and so on but it is also important that you shop around to find the best savings avenue for you.

Before this week I thought saving for retirement was impossible and that we would have very little but now with this new ISA and a plan I know in later life we will live a nice comfortable life.

Saving over Spending

You may remember I did a blog a little while ago on budgeting and the importance of budgeting brilliantly. Ever since I wrote that blog I have wanted to address the problem many people have of spending over saving.

Someone once told me – “life isn’t about what you earn it’s about what you save” and I think this statement is so true. If you earn a lot of money and just spend it all, you will be no richer than the person who made less money than you but knew how to save.

As the money you are making goes up your spending doesn’t have to go up with it! Sadly for many people when they get more money they decide to take on finance deals, sign big contracts or mortgages for property and buy brand new big ticket items without shopping round for the best deals.

Those of you that are in a fortunate place of earning good money, I implore you to plan for the future, as there is no guarantee that you will be making this money for the rest of your life. If your earnings do take a hit like if you lost your job or your company started seeing tough financial times, the companies that have given you credit are still going to want their money and you are still going to have to find a way to live.

I’m not saying don’t go and enjoy life and the rewards of your hard work, I’m just saying make sure you are prepared if life were to change in an instant. Have savings so you can live your retirement years as well as you lived your years in employment. Money can come and go but if you learn good money management skills they will never leave you and you will be able to deal with whatever comes your way.