How Saving a Little Can Gain You a Lot
Why should people save money?
The idea of saving money is an important one. Why, indeed, should people save money? Because it is in your best interests to do so. Mature people realize that saving moneyis a good thing for many reasons, and one of these is that saving money will get you the lifestyle you desire, in the long run, when it counts. Having savings will also make you feel secure and more confident about your ability to cope with changes in life. It is a sign of prudent thinking and mature behaviour designed to make your life easier.
I need to start saving money
You definitely do need to start saving money if you want to achieve and accumulate wealth into the future. Initiating regular savings positions you right at the beginning of your journey to become financially stableand build a sound financial future for yourself and your family.
Having savings will enable you to multiply your income. There is no point of spending all your money on yourself and your present needs. What you need to do to secure a good financial outcome for yourself for years to come is to start putting small amounts of money away each week and begin to grow your money tree.
Imagine if you ate a hamburger and fries every day and didn't do any exercise while your friend didn't but used their lunch hour to eat a healthy salad and went for a walk to exercise. At the end of the year both of you are looking at vastly different outcomes. You will be fatter and more unhealthy than your friend who will not only be healthier but will have more energy to put into positive things in their life.
The same logical outcome applies to savings; if you put away a small amount each week, at the end of the year you will find a nice amount of money waiting for you to use as you please. But the amount of money that you can save isn't the point - the point is that you acquire the habit of saving and thinking ahead.
Start saving young
You will reap the most benefit the longer you save as you will have acquired not only an amount of savings you can put to a good use to make more money but also the right attitude towards finances and responsibility.
Think of it this way - what you don't have you don't miss. So the best way to save money is to have a portion of your income that you want to save taken out automatically out of your pay every pay period. You'll never see the money, therefore you will not plan to spend it and you won't. It will sit in your saving account and accumulate interest over time. When you're ready to make an investment, your money is there, waiting to be put to good use.
What are the advantages of saving money?
The advantages of saving money are numerous. You can ensure your retirement by putting the savings to good use by investing your money as well as having a retirement fund. Also having money put away for emergencies will give you a peace of mind. You will avoid stress by having financial security; even a small amount of savings will put your mind at ease. Without savings you might have to borrow to pay for unexpected expenses and this will incur interest, which will then have to be repaid as well as the original amount borrowed.
Savings will enable you to drive a better bargain when buying things. You can get discounts for bulk-buying or even just for paying with cash. It all adds up and if you do not have any negotiating power you will pay the premium price most of the time.
Savings will also enable you to invest in shares and bonds which are a good investment if properly researched. Don't ever invest any more money that you can afford to lose. In other words: don't bet the farm on a speculative venture.
Savings will enable you to reduce your interest on borrowings. If you are buying a house or a car, you will most probably have to borrow money from the bank and they will charge interest. After all, that's how the bank makes money. So, by borrowing a smaller amount, you can get smaller and cheaper interest, and save thousands on large items.
How much of your income should you save?
About 10% of gross earnings is a reasonable figure to aim for but any little bit will help. The main thing is to start saving now and be consistent. If you have a retirement fund into which you are saving already, you are saving already so you don't have to save at 10% but those who don't better start saving as much as they comfortably can now.
The secret to saving money
And finally ... If you save 10% of your income, invest it wisely and do not borrow large amounts of money for items of depreciating value, you can do whatever you like with the remaining 90% of your income. Your financial success is guaranteed because of compound interest which will make your money work for you. The longer you do it the more money you will gain through accumulating interest.
Achieve Financial Success
Why should you have a spending budget?
Following a personal finance budget is the only way to go if you want to keep your household expenses covered each week and save money on a regular basis. Staying out of debt and having savings will enable you to be in control of your finances now and in the future so why not learn how to do it the easy way?
Learn how to set up a budget for yourself
If you have no experience in preparing a financial budget, you might find the idea a little overwhelming. In reality, making a budget is not all that hard. All you need to do is to follow these easy steps to set it up:
- Write down your fixed outgoings such as house repayments, loan payments, rates, car registration, insurance, school fees, children's sports activities costs etc.
- Add these up and divide by 52.
- Put this amount (the number you get by dividing your overall expenses by 52) aside each week into a separate account and don't use it for anything else.
- Have 10% of your gross income put into a separate account for savings - this is your money tree for investments)
Following a budget is not always easy, especially if you haven't followed one so far. So be prepared for some adjustments in your lifestyle. Once you get used to having a budget, your life will improve. This will require discipline and self-sacrifice but it will be worth it in the end. Even if you find that you will have to economize in certain areas ie. cut your spendings, you will find that you are copingfinancially much better and you and your family will be much better off for it, living a stress-free life.
Learn the secret to financial success
Financial success is not difficult to achieve if you have an income, make intelligent decisions, save money, invest it wisely and follow a budget to get where you want to be financially and living the life you've planned. The one basic rule that you need to remember to guide you financially is very simple - the only way you will achieve financial success is if you spend less than you earn and invest the surplus. Otherwise you will spend your life in debt.
So You Want to Own a House
Buying vs Building
Once you have decided to get into the real estate market, you are now faced with two choices:
- buying a house, or
- building a house
Both options are cost comparable if you have the right idea and execute it well. If you're leaning towards building a new house you will have to take into account your house design and your lifestyle, both of which will influence where you want to build. Consequently, this will have an impact on your budget.
Buying an established property can also set you back depending on what you want from your lifestyle and where you see yourself living. So which is better? That decision is entirely up to you but there are few fundamentals you should consider while making the decision to build or buy.
Building off the plan
If you decide to build, you might want to consider buying a house off the plan, using a builder's standard plan after you've inspected the house design at the builder's display village. It is the best way of visualizing what you'll be getting for your money.
If you decide to design your own house, you will almost always find that the finished new house isn't quite what you had in mind when you designed the house. After the house is completed, you will find a number of things that you do not like which you did not think of when in the planning stage, and you cannot blame the builder if he followed your design and plan to the letter. So think carefully about all your needs when designing a brand new house.
Another thing to consider is that building a house according to your own design includes extra costs which you may not have been aware of when envisioning the finished house. You will find, during the process of supervising each new step and addition, that you will often come up against problems that will lead you to add to or change some aspect of your house design, with all this leading to increased costs. Most new houses will come up above budget so beware.
Another problem you will encounter is that of extra time that has not been budgeted for. Building a house takes a lot longer than anticipated. It does because there are several factor that you will not be able to control such as the weather and the availability of supplies for the house.
But the most important factor to consider is the financialstability and longevity in business of your chosen builder. Do not engage a builder unless you have seen the quality of his work. You do need to do your due diligence research when choosing a reputable builder. Ask about suitable reputable builders in the local real estate office, chat with real estate agents who will have extensive real estate knowledge in the area and ask them to show you newly build houses. Check the builder's credentials; they should be registered with appropriate building associations with code of ethics to which all members must adhere.
What to look for when buying land to build on
When you're buying land, make sure that your house plan fits within the boundaries of the building plot after allowance has been made for the amount of clearance on all four sides of the building that is required by the local authority. For this reason, it is important to have a check survey done to make sure that the boundaries are where it is said they are on your documents. You really want to avoid a boundary issue where your neighbour can prove that your house is partially built on their land. It would be very costly to settle this dispute.
Next, you will have to invest to have a soil test done. It is in your best interest because if your house is built on defective soil, it will cost you additional thousands of dollars in extra foundations to rectify the problem. The presence of rock, for example, will add extra costs.
You should definitely have your builder come inspect the land on which you intend to build prior to signing the building contract and the buying contract. The builder will be able to tell you if your design is suitable for the land you've chosen and also help you estimate the costs of building items such as retaining walls, water diversion and general site preparation.
Deciding to buy a house
If you decide to buy a house instead of building one, you have two choices to make:
- you can buy an old house, or
- you can buy a new house
Buying an old house has its advantages. Most of the hard work around the garden will most probably have been done, such as fences and driveways; the house will have a nice, established, lived-in feeling that might just suit you perfectly. On the other hand, there may be repairs and maintenance costs involved.
Another advantage of buying an established home is that you will have an idea of how your neighbours like to upkeep their property, who they are and how they take care of their houses, and also what the neighbourhood has to offer in general.
Buying a new house is also an attractive proposition. A new house looks good, feels brand new and you can use it to create a few changes to make it special and individually yours with only a few minor alterations. It will be modern throughout and maintenance costs should not be an issue in the first few years after purchase. Most probably, you will pay a bit more to buy a new house than an older, established property., but this also depends on the suburb/area you're purchasing in.
Renting out your investment property
Your investment property should be managed so that its value grows. Otherwise there is no point having an investment house in the first place. So how do you safeguard your investment? By finding good tenants who will take care of the property and stay long-term. Long-term tenants are really what you're aiming for when renting your house because it will minimize your financial input into your investment. Of course, you will have to upkeep the property regularly to keep your tenants but it will be worth it in the end.
What should you do to get good tenants
If you are managing your property yourself, you are running the risk of getting too involved with your tenants' personal life. It is very difficult to collect rent from someone who has just lost their job or whose relationship has recently broken down and they're pleading poverty. The fact is, if you've carefully selected your tenants, these issues should not arise.
When selecting tenants, go by your instinct. First impressions count for a lot. Do read letters of recommendations from previous landlords but be aware these can be easily forged or the previous landlord may have wanted to rid himself/herself of these tenants so much that they were willing to provide them with such a recommendation just to have them move on.
The best thing for you to do to secure good people for your rental is to have a good conversation with your prospective tenants. You will get an overview, a good estimation whether these people are trustworthy or not if you allow yourself to remain objective and go with your 'gut' feeling. Do not be afraid to ask about their family situation regarding the number of people who will be living at the address, how many pets, children etc. Also pertinent is any information about the prospective tenants' employment situation; the length of employment in one place, for example, is of particular relevance to you as some tenants tend to 'lose' their jobs a few weeks into living in your house. If possible, speak with their previous landlord or even go see the previous property to see what state the tenants left the place in.
The main thing here is to remember that this is a business relationship. You provide accommodation to your tenants for a payment. That and nothing else is the transaction. You're not their friend, psychiatrist or doctor. Their personal situation is their personal situation. If you get the feeling that your prospective tenants have a complicated personal relationship or have provided references from too many places where they lived only for a short period of time, do not rent to these people. You will regret it if you do.
It cannot be emphasized too strongly that any sort of personal involvement with your tenants should be avoided. This may sound callous but do not allow yourself to feel sorry for them; in fact, if, during your first conversation, you perceive that too many references to some regrettable personal situation such as a divorce/abandonment or single parenthood woes etc are being made, do not rent to these people. They will try to involve you in their problems to get your sympathy and set the ground for not paying rent.
Realistically, the cheaper the rent on your property, the more issue-riddled tenants you will get. You'll be much better off having a property in a good area and properly renovated because you could charge more rent, and you will attract the sort of tenant you ultimately want - punctual with rent and respectful to your property.
Should you get a real estate agent to look after your property?
In some cases, definitely but on the whole it doesn't make a great deal of difference. A real estate agent will charge between 8% and 10% of the gross rent to manage your property. It doesn't seem much and for that reason you can't expect the agent to put too much effort into managing your rental property. It's not high on the list of the real estate agent's priorities. As long as the rent is collected, they will not inspect or pay too close attention to what is going on at the house.
Even if you do decide to go with an agent, it makes sense to keep an eye on your property yourself. You could always give a limited lease to begin with, to give yourself an out of a bad situation. Unfortunately, the law favors the tenant so if your tenants are damaging the property, there will be little you can immediately do to stop it. Once you've got bad tenants in, you're in a situation where your tenants have the advantage. It takes a lot of time and aggravation to evict bad tenants and you will not get them to cover damages they have caused. It really comes down to choosing your tenants carefully in the first place.
Good tenants are worth keeping
Once you've moved people in whom you can trust, you can have a nice and mutually beneficial relationship. You can get anything in life you want, if you help other people get what they want. Your tenants will be happy to put up their own curtains, for example, if you pay for the material, or paint the house the colour of their choice, if you provide the paint and equipment. If pays for you to keep your good tenants happy because your rental property will benefit and your investment will grow in value.
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