Why Savings are Important

There are a number of different reasons why savings can prove a useful resource to consumers. Savings are effectively a security blanket for those times when an extra cost is faced. Of course this additional cost could be anything from a new appliance; like a washing machine or the wish to pay for a holiday. The point being is that savings can assist you in instances where your monthly income is not able to cover a cost. It is with this in mind that we will now consider how to ensure saving allowances are made on a monthly basis, in order to build up an easily accessible resource.

The most suitable way to plan for savings is by allowing for an amount in your monthly salary each month to be specifically allocated to this resource. Many consumers would argue it is difficult to save effectively due to their general living costs and undoubtedly this could be true. In reality though any form of savings is far better than no savings at all and one of the best ways of saving effectively is to understand how a savings allowance could fit into your normal budget. In order to do this you must first understand exactly what your normal budget entails. This means honestly and in a accurate manner, listing all the costs which are paid each and every month and comparing that amount to the amount received as a salary. Many consumers do not live by a budget and this can sometimes be the reason why saving in an effective manner becomes a difficult task to complete. In reality many of us have a far higher ability to save then we are fully aware of and this is due to a lack of effective budget planning.

A budget to work as intended needs to include realistic information concerning your personal expenditure. This means ensuring you account for all costs which are faced each month and aside from the obvious, such as rent and other living costs, this will vary from one individual to the next. The point being that you must be able to be honest with what is repaid each month before you can truly understand what you are left with as your spare and disposable funds. The reason for this is because you will need to allocate some of this spare income as your savings budget going forward. Let’s look at an example to highlight how this can easily be achieved. Take a consumer who earns £1300.00 each month, having accurately completed their budget they now understand they have £400.00 which is spare each month and therefore this amount could be broken down to £100.00 each and every week used as spare income. Over the course of the year this clearly adds up to quite a sizable amount. So why not agree that as part of your budget you will save £20.00 from your spare income with the intention of saving nearly £1000.00 in a year, which in turn could be used for next year’s holiday for example.

How to budget for a holiday

Many of us like to ensure we can get a holiday on a yearly basis. In order to do so it is likely they will be a level of planning which needs to take place. Although some of us are able to afford to pay for a holiday ‘there and then’ for the vast majority of us there is a much greater need to plan in advance to ensure the trip itself is affordable and therefore be enjoyed for what it is; a treat! Holidays can of course vary vastly in terms of the cost so it is important to ensure that whilst planning you do so in a manner which is somewhat sensible and definitely realistic. Put simply, you may not be able to afford to go to Disney World at a cost of 5 thousand pounds unless you give time to planning for the cost in advance. Equally given that a holiday is certainly meant to be something which is enjoyed and an opportunity to relax, ending up paying for it for months and months to come may leave a somewhat bitter feeling. That’s why planning can be so useful as it means you could place yourself in a position where the total cost is covered and repaid long before the holiday itself arrives.

As you have probably gathered from the above, one of the best ways to plan for a holiday is in advance of its arrival and this means actively saving some of your spare money each month for this specific reason. Given the cost of holidays can vary in value, it is wise to also have an idea of a budget in mind when you start the process of saving, so as to ensure the correct amount is available as and when it is then needed. Therefore it may be wise to discuss with your friends or family; depending on who you are going with, what sort of holiday they would also like to consider. By doing this you will be able to set a realistic goal which can then be worked towards over the coming months. When deciding upon your plan it would also be worth considering if the cost of the holiday itself is the only resource you need to plan your budget for. The reason for mentioning this is that for many of us there needs to be an allowance made also for the cost of spending money once you reach your selected destination.

Once all the relevant costs have been considered you will need to adjust your monthly budget accordingly. This means you will need to make cuts in areas where you would usually spend your money freely. It may be worth considering this fact in advance of up and coming events such as trips out and dining out even. If you are used to having a take away every week you may need to cut this cost for example, to ensure you reach the required amount to have the holiday you are planning for.