Starting a Savings Plan
We often get asked what is the best way to start a Savings Plan and if you don't have a set goal like a new car, a holiday or something else you are dreaming of right now, it can be hard to know where to start.
The best place to start with for a savings plan is to setup a rainy day fund for yourself. Yes I know the last time you probably heard the term rainy day fund was from your Grandma but the term is just as relevant today as it was for your grandparents.
Take 10 minutes to look through all of your insurance policies, house insurance, contents insurance, car insurance, health insurance and any other insurances you may have.
Write a list of the excesses under these policies, how much you have to pay towards any claim you make.
It's great to have insurance to cover you if something goes wrong, but lets make sure you are also covered for the excess in case something happens and you need to make a claim.
Once you have the total of your policy excesses, that's the start of your rainy day fund. Divide the total by 52, 26 or 12 to match your paydays next year.
Your new goal for 2010 is to start your rainy day fund and each payday you can set aside this amount to start building your fund. Make sure you setup a separate high interest savings account for your rainy day fund.
As 2010 starts, feel free to add a bit extra to your rainy day fund to cover those little extras that happen when we least expect them like the fridge needing repairs or new tyres for the car.
Your goal is to start small and make sure your rainy day fund covers your insurance excesses. Once you have this amount, keep building your fund to turn it into your personal emergency fund to help cover unexpected extras.
If you're after a New Year's resolution, make it setting up your personal emergency fund. What a great way to start 2010!
