Staying Out Of Debt
In today’s society debt is an issue for many people. Almost everyone knows someone who has been affected by debt. One major way to avoid getting into debt is to plan ahead, not just by creating a budget and sticking to it, but also by saving.
Saving money is a very similar principle to setting a budget. Firstly you need to look at how frequently you are paid. If you are paid monthly then you set yourself a monthly savings target, if weekly then a weekly savings target should be set. Generally you should aim to save at least 10% of what you bring home in your pay-packet after tax, national insurance etc. So if, for example you earn £1,200, then you should aim to put £120 of that into a savings account. However, if your on a really tight budget save as much as you can afford to, even 1% is better than nothing.
It is very important to keep your savings in a separate account to your normal everyday spending account, otherwise you risk unwittingly spending your savings. It is also extremely important that you make your savings work for you – you want to get as much benefit from your savings as possible, so a high interest account such as an ISA is advisable. Once you have put your savings into your chosen account forget about them, they are not extra money for you to use on frivolous things, they are there as a back up plan, to stop you getting into debt if a cash-crisis emerges such as the temporary loss of income or your roof collapses.
Dedicating the time to sorting out your finances and planning a savings-budget is one of the most important investments that you can make. Making a small commitment to save just 10% of your pay, an amount which many of us would not miss, could really make the difference between being financially secure and getting into debt.
