How to Save Money - The Ultimate Guide to Wealth

Credit cards can also be very powerful financial tools, but only if used correctly. So, it’s very important the purpose for using a credit card. Below are a few purposes for using a credit card.

For purchases over the phone and on the internet 

When using a card for purchases over the phone and on the internet it is best to use a visa access card, which is used like a credit card but links directly to a person’s everyday account, so that that person uses only the money that he/she possess.

For occasional purchases

Most cards do not charge interest on purchases when the entire card balance is paid off within a specified time period (usually 44 to 55 days) So, this advantage can be taken when to purchase something unexpected and urgently needed, or when saving some money by purchasing goods on sale knowing that the entire card balance can be paid off in near future.

For minimizing the cost of the existing card dept

The cost of the card dept can be reduced by transferring the credit card balance to an other card with better interest rate or conditions. So, there are credit card companies that offer very low interest rates on balance transfers for a period of time.

For large purchases

Credit card interest rates are similar to those of personal loan, and they can even be cheaper. Unlike personal loan, set - up fees are rarely charged and many people find that they can get a credit card when refused a personal loan.

When using a credit card for large purchases it is very important to find out the amount of money that is needed to be borrowed, the conditions for a suitable credit card and to decide what is the amount that can be paid towards the purchase every week. The credit card calculator at http://fido.asic.gov.au can be helpful by calculating the interest that will be paid on the purchase and how long will it take to pay off the credit card. So, if the cost of borrowing is acceptable, the next step is to apply for the chosen card and see if a high enough credit card limit, to afford purchase, is received.

For large purchases - Interest free

Free periods on purchases are offered by retailers and these forms of finance are actually credit cards with extended interest free periods for these promotional purchases. These cards often have extremely high interest rates (15% above a standard low rate card) and high fees, so it’s very important that the purchase is paid back within the interest free period.

To determine the way to pay off the purchase before the interest free period, divide the purchase amount by the number of weeks(fortnights or months) in the interest free period and the result will be the amount that has to be paid every week (fortnight or month).

Credit cards are one of the most variable methods of finance, with an interest rates from 0% to over 30%, with differing fees and too many special terms and conditions to mention. Unlike a personal loan, there is no specified time to repay the money, so what is paid off can easily be spent again.

How much can a credit card cost a person?

What is interesting about credit cards is that the lenders often give a person a higher credit card limit than they would give in a personal loan and it is also possible that a person, that is considered to be risky for a personal loan, to be given a credit card. So, in fact lenders gamble their money on that person not being able to pay off the credit limit quickly and the longer it takes to pay off the credit limit the more money they make.

Even by paying the minimum payments that the bank requires every month, that is still a very small payment to reduce the amount that has been borrowed.

Loans are a simple form of finance with a fixed term and the bank decides how long and by that how much a person will have to pay each week, fortnight or month. So, paying the loan off is compulsory, unless the loan has been defaulted or redrawn, and it will be paid off within the time specified by the bank.

How much does a loan cost?

The main cost of a loan is the interest charged. And interest rates can go anywhere from 8% to 16% depending on how risky the bank considers the loan to a specific person. So, if the person is on a low income with no assets to give as security, the bank will determine a higher interest rate.

On top of interests a person is also likely to be charged set-up and on-going fees and these fees can add a significant amount to the cost of the loan. A comparison rate shows the total cost of the loan, including fees and charges, as an interest rate only. So, this can make it easier to compare the total cost of a loan between different loan products and lenders.

How to minimize the cost of the loan?

The most important thing a person has to know about loans is that the interest charged is compound interest, which is an interest calculated multiple times during the life of the loan (usually every day).

Compound interest is calculated when the outstanding balance of the loan is multiplied by the interest rate. So, the lower the outstanding balance, the lower the amount of interest paid. According to this, a person can reduce the outstanding balance of the loan by paying more at the start of the loan. On the other hand, if a person makes lower payments at the start and higher payments at the end of a loan the interest paying will be higher.

The amount of borrowed money is called dept and it actually is the money that a person has spent but does not possess. So, money borrowing has it’s own advantages and disadvantages.

By borrowing money a person can get things right now instead of waiting to have saved the needed amount. So by debt a person can get ahead, such as to buy a car which is needed to get a new job.

The disadvantage is that debt costs money.  That is because more money than borrowed have to be paid back because by borrowing money a person pays back not only the principles but the interests as well.

In the next sections there will be a look at the most common kinds of debt, including the traps that need to be avoid, how to make the best use of borrowing methods that are available and how best to minimize with the existing dept.

Once the budget is adjusted, so the balance is positive, a person can continue by saving some extra money. And the easiest way to save money is by setting financial goals.

What is a financial goal?

The financial goal increases the motivation for saving money. So, basically a financial goal is something that a person likes to possess. According to this, a financial goal can be something that could make life easier such as a microwave, or a computer, or it can be a reward like a night out, or a holiday.

Once the financial goals are settled, saving becomes very easy. By every dollar saved the person is closer to achieving the goals.

Setting financial goals

So, the first thing at setting financial goals is to draw up a list of priorities and the ways of achieving the same. It is very important that the goals are achievable and realistic.

The best way to start setting goals is with something small like a bike or a microwave and than build up to bigger and more important financial goals. That way the progress tracking would be easier, so bigger goals will be easier to achieve. And by that the person’s confidence in the saving abilities can also be increased.

Achieving financial goals

The first thing that has to be done at achieving goals is to make a plan. According to the budget, a person can be aware of the amount of money that can be saved. So it is important that a commitment to save money every week or every fortnight is made.

Setbacks can occur, caused by unexpected events, and that is all right as long as the sight of the financial goals is not lost. So, basically the tip in achieving financial goals is putting money aside as often as possible.

How much is needed to set aside each week to achieve financial goals?

Finding out how much to set aside each week, fortnight or month is by dividing the amount of money that needs to be saved with the number of weeks, fortnights or months that the saving process is planned to take. So the result is the amount that needs to be set aside each week, fortnight or month.

The information about how long is the saving process going to last, if there are no setbacks, can be calculated by dividing the amount that is needed to be saved with the amount that can be afforded to be saved. And the result is the amount of weeks, fortnights or months that will take to save that amount.

And if a person is interested in knowing the amount of money that can be saved, by putting aside a certain amount over a certain period of time, that can be calculated by multiplying the amount of money with the number of weeks, fortnights or months.

“Back in the black” is a term used to express possession of extra money, after meeting all the basic necessities as well as a few luxuries.

There are a few things that these extra money can be used for.

So, they can be used for paying any outstanding bills, such as credit card bills, or bank loans. And by paying bills as soon as possible, paying interests can be avoid. And if there are extra money left after this, a person can put this extra money aside and start saving in order to achieve financial goals.

We previously wrote about cutting down your expenses to save more money.

Of course, the alternative way is to simply increase your income. If you are really serious about being wealthy, you should focus on both increasing your income and decreasing your expenses.

We recently ran a series of financial literacy workshops for young mothers. The most common ways for these young single mothers to increase their income include:

• Picking up another shift or working overtime.
• Considering if there are other higher paying jobs available
• Considering the possibility of a second job
• Renting out the spare room or granny flat
• Teaching or tutoring others
• Baby sitting other children
• Starting a business

If you have any more ideas, why not share them?

A friend of mine recently became a doctor. He sees many people each day. Each with different ailments and conditions - all looking for the answer.

Everyone has their own ‘unique’ problems that (just so happens to be) worse than everyone elses.

So everyone is looking for the cure. Not a treatment. But a solution to their problems.

But there isn’t one. Those who advertise fantastic offers are lying. Those who promise to solve all your money problems overnight are lying too. But that’s not their problem. It’s simply what sells. 

Instead, there’s only the treatment. And in the case of debt, treatment is long, ugly, and brutal. But trust me, you’ll get there one day. I promise.

To everyone that has emailed us asking where we are:

We sincerely apologise.

We admit we’ve neglected this blog. But now we’re back with more guides, tips and rants on saving money. We’ve got a new team, fresh ideas and bold plans. That’s right, MYOM is under new management!

Sorry for the wait.