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Investments

Is Investment Better Than Savings?

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Many people are not really sure what the difference is between investing and saving and whether one is better than the other. It is a good idea to make sure that you do know what they are and then you will be able to make the right decision for you.

What is Investing

Investing is when you use your money to buy something that you hope will increase in value. This can be anything but commonly it will be a house, shares in a company or antiques and art. There is a risk with an investment. That when you come to sell the item that you have bought, that you will find that it is worth less than you bought it for and you lose money. There is also a chance that it will have increased in value massively and you will be able to make a lot of money from it. Therefore, there is an element of risk, where you will not be sure whether you are going to end up getting more or less than you paid for the item. The longer you hold the investment, the more likely it is to increase in value. You will also find that the investment may need to be quite a significant amount of money in order for you to be able to invest in it. Despite the risk though, returns on investments tend to be relatively high compared to savings accounts.

What are Savings

Savings are very different to investments. You will put your money into an account and then you will be paid interest on it. When you want to withdraw (or can withdraw) the money you will get back everything that you put in plus any interest that is due to you as well. Savings accounts do vary, like investments do. You can have an instant access account and get your money out right away, but that will not pay very much in interest. There are other accounts where you might be paid more. For example, you can use a notice account where you will have to give a certain amount of days notice before withdrawing and the interest will be higher. You can also buy a bond and you will have to keep it for a certain time period and at the end you will paid interest at a comparatively high rate. However, despite having this choice savings accounts will pay a lot less than investments on average.

So, deciding which is best is not an easy task. An investment can be a bit of a gamble, where you can potentially get more money back but you will need to be prepared to lose the money. It is therefore often said that we should only invest money that we are prepared to lose. It is also key to keep the money invested for a long time. This is because we will want to make sure that we overcome any natural fluctuations in price. If you keep the money invested for a short time, it may go down in value or is unlikely to go up very much. Often investments will need to be kept for at least ten years if not longer, in order to see a significant increase in value.

You will have to decide whether you have money that you can afford to lose and that you are prepared to keep tied up for a long time. If you do, then an investment could be the answer. However, you will need to think about whether you are happy to invest or whether you would rather keep your money safely in a savings account.

Savings

Is it Good to Have Some Savings?

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There are some people that have a lot of savings behind them and swear that having savings is really important, but there are also people who do not rely on it too heavily and feel that it is not worth saving money. If you are wondering whether having savings is a good idea, it is worth thinking about the pros and cons and also considering your own situation and whether they will benefit you personally.

Advantages of Having Savings

When you have savings you will be able to know that there is some money available for when you need it. This means that if you have an emergency and suddenly find you do not have enough money for something, you will be able to use the savings to pay for it.
You can earn some interest on savings, which means that just by having them in the bank, you will be able to have some payment for them.
It can give you a sense of security knowing that you have the money there if you need it.
It can be a good way to save up for something so that you can afford it, such as a holiday.
You will be able to avoid borrowing money in some situations and therefore not pay the cost of the loan.

Disadvantages of Having Savings

You will be putting money into the savings account when you could otherwise be spending it right now on things that you want.
The interest you get is likely to be low and could even be lower than inflation so you could be losing out by saving rather than spending and getting the full value out of the money.
If you need money you will have the option of borrowing so it may make no difference as to whether you have savings behind you as you will still be able to get money if you need it.
If you use savings to pay for things, you will have to replenish them and that could be as difficult as making loan repayments.

Whether you feel that having savings will work for you will depend on what you feel is important. Consider whether you will feel better if you know that you have money behind you or whether you will be happier if you are spending money. It is worth thinking about the costs of borrowing and whether this will have a bearing on whether you feel that it will be better to save the money and have something to use if you need it or whether you are happy to use a loan with no guarantor. It is worth also thinking about the fact that you will need a good credit report to be able to borrow money in most cases and you will need to make sure that you are confident that you will be able to repay the loan. It might be hard to save money, especially if you do not have much left each month or any at all. However, if you do feel that saving up is important, then you could find ways to do it. Perhaps by cutting down on how much you are buying, trying to pay less for the items that you do buy and looking for ways to make some extra income. If you start thinking about it, it is likely that you will come up with some ideas on what you can do in order to be able to save. The more motivated you are, the easier you will find it to make the necessary changes to achieve your goal.

Retirement

Can I Prepare Better for Retirement?

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Retirement is something which perhaps does not come to mind that often when we are young but as we get nearer to our retirement, we start to think about it more often. We might start to worry about preparing well for it and what we can perhaps do to make sure that we are able to manage when we have retired. It is perfectly understandable to at times we may be concerned and that as it gets nearer our concerns will grow. It is obviously best to plan as early as possible, but there are things that you can do at any time so that you can prepare for it.

Check your Situation

To start with check what situation you are in with regards to being able to manage in retirement. Most people will use pensions to manage and we will all have a government pension and it is easy to look online, on the government website to find out what contributions you have made and as a result how much you will receive. It is useful to know that even if you earn a low amount, you can make voluntary contributions to your pension each year so that you get more. This can be pretty cheap and can be done through a self-assessment tax return which anyone can opt to fill out. Right at the end you can opt in for voluntary class 2 national insurance contributions, which will contribute towards your pension fund with the government.

You may also have work pensions and personal pensions. You may have started several work pensions with different jobs and have different amounts due to you from those and it can be a good idea to find out more about them and what they will pay out. Sometimes people merge their pensions so that it all comes form one source, but it is wise to take financial advice on this because it could mean that you end up getting less back. It may be easier just to cope with the paperwork associated with having several but get more money.

You may also have other things that you plan on using for retirement to help you out financially. Perhaps you have investments which you hope will give you an income or you will sell so that you can use the money or things like this. It is good to have a think, however do not rely on inheritance. Some people assume that they will inherit money or property from parents or other family members. It is wise to not rely on this because you never know what might happen. You could find that they need care and they have to sell everything they have and spend the money to pay for it. They may decide to release equity in their home and spend the money. It can be very useful to inherit of course, but it is best to assume you will not.

Consider What you Will Need

You will need to sit down and work out how much money you think that will need in retirement as well as how much you would like to have. Then you will be able to see whether the funds that you already have in place will be enough. If they are not, then you can start to think about what you will do. You will need to decide whether you want to take out a personal pension or make other investments or savings so that you have the money that you need. It could be wise to get financial advice on this or do a lot of research so that you know that you are doing the right thing.

Business

Is it a Good Time to Start a Business?

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Starting a business can seem like a really good idea. This is because you can be your own boss, work the hours that you want to and be in control of what you are doing. However, you may wonder whether it is the right time for you to start a business. It is well worth thinking about this as there are a number of things that could have an impact on whether this is the right time for you to start a business.

Is the Economy Right?

It is wise to have a look at the state of the economy in general. Think about whether it is in a state which could work well for opening a business. If it is in recession then people will not be spending so much money and that means that it might not be good for starting a new business as people may not be able to afford to shop with you. It will depend on what you are selling.

Is the Market Right?

It is also a good idea to think about what you are selling and whether that is something that people are buying at the moment. It is so easy to just assume that because you feel that it is something that you would want of buy, that everyone will be as keen to get one. However, you cannot be sure and you should find out more first. Talk to friends and family and perhaps try to find out in social media to get a good idea of whether there are people that are interested in the items that you are going to be offering. It could be that there is a saturation of similar products or that people are just not buying that sort of thing right now.

Are you Prepared?

Being prepared yourself is the most important part. There will be a selection of things that you will need to think about before you start a business.

You will need to have an understanding of how to run a business. You will need to know about how to keep accounts and what tax you will be responsible for paying as well as insurance. If you have staff or customers on site you will need to be aware of the laws around that as well as health and safety and risk assessments. This can seem really dull and boring but is important and if you are the business owner then it will be your responsibility to know it.
You will also need to know about what you are selling, how and where you will sell it, what price you will charge for it etc. You will need to make sure that you make enough money form selling it to make a profit and will therefore need to price it up really carefully to start with as it will be very hard to raise your prices later if you realise that you are selling things for such a low price that you cannot cover your costs.
You will also need to make sure that you will be financially able to cope with running a business. You might need to put money in to the business to start it up and then you will need to think about what you will be making. You may find that you will have to put a lot of money in to start with or even if you do not put money in, you will perhaps not make money to start with or very much money. This means that you will need to have some money available to pay your living expenses until you start making a decent profit and are able to be able to pay yourself too.

Student Loans

Is a Student Loan a Good Idea?

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If you are considering studying a degree course or your child is then you may be considering whether a student loan is a good idea. There are many people that have concerns about this and because the courses are so expensive it is not surprising. However, there are many advantages as well and it is good to weight up the pros and cons.

Advantages

A student loan may allow you to be able to afford to pay for a course that you would not otherwise be able to afford. The course could provide you with a qualification that will lead to you getting a better paid job or a career that you really enjoy.
You will not have to start repaying the loan at least until the course is completed.
The repayments on a student loan are means tested, this means that if the graduate is not earning much money they will not be expected to repay.
The repayments are taken out using a tax code. This means that employed students will not have to worry about repayments, they will come out automatically when they are paid and they will not have to worry about them.
If the loan is not repaid once thirty years have passed the government will write it off. This means that potentially nothing will be repaid if the graduate never finds a job, but all of it might be if they are in a high paid job from the time that they leave university. What this does mean is that the graduate will only repay what they can afford and they will not necessarily pay it all. A majority of students do not repay their loans in full, either because they do not have a job that pays highly enough or because they take a break from work to have a family or care for loved ones.

Disadvantages

A degree takes at least three years to study for and it means that you will spend three years out of the workforce. This could mean that you will miss out on work experience for three years which could put those who did not choose to study at an advantage. This will of course, very much depend on the career that you go into and whether a degree is essential before you are allowed to start.
Although the student loan will not show up on your credit report it will be taken into account when taking out a mortgage. This is because mortgage lenders will want to check that you have enough money to be able to afford the repayments and will therefore do a closer check of your finances to see whether you have enough income left after your bills to afford the repayments.
Some people get worries about being in debt and having a loan for thirty years can be stressful for them. Hopefully if they can think of it as a graduate tax scheme (which is what other countries call it) rather than a loan, this will help.
There is a worry by some people, that if a graduate leave university with a loan, this might encourage them to borrow money for other things as well because they feel borrowing is acceptable. Although it would be concerning if they just started borrowing money for no good reason, it is worth remembering that borrowing is not always a bad thing. Borrowing for a house, when you can afford the repayments can be a good reason for borrowing money and there are many other examples of good debt as well.