Should I Spend or Save?

It can sometimes be quite a dilemma working out whether we should spend or save our money. It is a good idea to think it through as you may find that there are advantages and disadvantages to both. It is worth thinking about which will suit you best.

Advantages of Saving

There are many advantages of saving money. If you put money into a savings account then it will earn interest which will mean that your money will grow. You will also have some money put away to fall back on if you need it. This means that if you have to buy something and you have not financially planned for it or there is an emergency and you have to find something, you will have some money available for you. It can give you peace of mind knowing that you have that money there if you need it and it could mean that you will not need to use a loan to pay for the item. It can also be useful if you want to save up for something expensive, perhaps a new car or a vacation.

Advantages of Spending

There are many advantages of spending money. You may be able to pay off loans, pay your utilities, and for other essentials. You might also be able to treat yourself to a few things as well. We all spend a lot of money anyway because we have to pay for everything that we need. We often need to spend all of that money that we have in order to be comfortable or we may have a bit extra and decide to spend it on some extra treats so that we can have fun and really enjoy life.

Which to Choose?

If you have paid for everything that we need and have some money left over, then you will need to choose between spending or saving. At time sit can be a tricky decision. You might want to treat yourself to something, but you may feel that you really should have a bit of money saved up just in case.

It can be really wise to have some money saved up. Some people even recommend having a good few months salary saved in case you lose your job. You will need to think about how much you feel will be the right amount. It could be that you have more than one income in the household and so you will not need to use so many savings if one of you loses their job.

If you want to buy something big, then it can be a good idea to save as much as you can so that you can afford it as quickly as possible. You could use any savings that you already have as well, but once those are spent it is wise to build up those savings again so that you always have some to fall back on.

When savings interest rates are very low, it can be tempting to spend money instead. Sometimes the rates are so low that inflation is higher which means that money effectively devalues when it is in a savings account. This can mean that it is very tempting to spend rather than save because it feels that there is no value in saving. However, if you have no savings, then you could regret spending lots of money if you need to pay for things and have no money available to do so. Even if the savings are not gaining in value, they are likely still to offer you a better option than having to borrow the money instead.

It would be impossible to save all of your money as you will always need to buy things. However, it is also sensible to have some savings so that you have peace of mind and money behind you for when you might need it. The hardest thing to do can be deciding how much you need. If you can find some savings accounts which offer higher levels of interest it might be good to put some money in those so that you can gain more from them. You may find that you have to tie your money up in these, but if you have some in an instant access account then this might be useful as well, in case you need some money in an emergency. You need to think about what you feel comfortable with.

Building up savings can take some time and effort. It will mean that you are likely to have to go without some luxuries for a while. You may have to wait to buy some things until you have built up enough. However, you can choose the rate that you save, so you might decide to save some of your spare money and spend some of it so that you can still buy a few extra things. Whether you do this or just save hard is up to you and you will need to think about where your priorities lie. Everyone has different ideas on spending and saving and it is wise to thinks about the advantage and disadvantages of both and then deciding which will be the best for you. If you are not the only financial contributor to your household it could be wise to discuss it with others in the household too.

Is it Worth Repaying a Loan Early?

Many of us have loans and some people feel that it is a good idea to repay a loan early. There are pros and cons to doing this and it is worth investigating these before you decide whether paying the loan back early is the right decision for you.

Cost

The main reason that many people will repay a loan early is because of the cost. The cost of a loan will normally be higher the longer you have it for. This is because loans have interest charged on them and this is usually calculated monthly or daily. So, the longer you have the loan, the more interest will be adding up. So, if you repay it early, you will be charged less interest and the loan will be cheaper.

It is important to be wary though. There are some loans which charge you if you repay them early. Find out if this is the case with the loans that you have and work out whether you can still save money if you repay them early. It will very much depend on how much it costs and how long it is until you repay the loan anyway. You might be best to telephone the lender and ask them to do the calculations for you as to how much interest you will pay for the remaining time that the loan lasts and how that compares to the fee they charge for early repayment. Not all loans have a fee for this though, so it may not always be relevant.

Reduce Monthly Outgoings

Finding the money to repay the loan each month can sometimes be difficult. It means that you are paying out more money each month than you would be if you did not have the loan. If the loan is repaid, then there will no longer be this repayment to have to think about and this could be a big relief for some. Without having to make the repayment you will have money left for other things or you will find it easier to pay for all of the things that you need. Obviously you will need to consider how you are going to find that extra money to repay the loan, but hopefully you will be able to and you will eventually be able to repay it.

Stress

Some people find having a loan stressful. This is not the case for everyone and as loans can be useful there is not really any need to feel like this. However, for some people having the loan repaid will help them to feel more relaxed. Some people just do not like owing money, some find coming up with the repayment each month stressful and others find that having less money is difficult for them. By not having the loan, that stress with disappear and this should help you to feel better.

Credit Score

If you owe money then it can have an impact on your credit score. Although making regular payments can be good, as it shows that you are capable of repaying a loan, having too many loans will put off some lenders as it could indicate that you will have less money available to repay. If you repay a loan early, this will show that you can be trusted with money and could have a positive impact on future lenders and anyone else that is looking at your credit score.

Of course, you will need to find the money to be able to repay your loan early. This may not be too easy or it may take you a long time to get together enough to be able to repay your loan. However, even if you only repay a small amount it will all add up. The more that you can pay off the loan, the less interest you will be charged. Even if you can only pay off small amounts, they will reduce the interest you are paying, which will give you more money to be able to pay off some more. You should be able to gradually increase the amount of money that you are repaying so that you will eventually be able to pay off the whole of the loan. It should get easier as you go along which should help you to stay motivated as well.

Some people will feel more strongly about repaying the loan than others. Some may feel they are happy repaying at the rate that they are and do not feel concerned about it. This is fine and you should not feel pressure to repay if you do not want to but if you do want to repay, it is possible but worth investigating first to make sure that it will be cost effective for you and that it will suit you.