Saving for a Rainy Day is a blog about savings with interest and compound growth.
The future is coming, so better save now.
The blog is about personal saving and saving for retirement. It is written in a conversational tone. The readers of the blog are interested in how to save money in a more effective way. Some readers may be retired and looking for ways to invest their savings, while others may be younger and want to know how to save for the future.
The writer’s goal is to teach people how to save money effectively by using compound growth as well as other methods. The blog also contains information about taxation and interest rates.
Saving for a Rainy Day is about saving when you have some extra income. A good time to start your savings account is when you receive an annual bonus or a tax refund from the IRS.
The more often you save and the longer you save, the bigger your account will grow. To make the most of your money, you will want to keep your money invested in a high-interest savings account.
Putting $1000 in a savings account at 2% interest per year with no additional deposits will take 35 years and 10 months to double. The same deposit in a savings account earning 5% interest per year will take 14 years and 2 months to double.
Interest earned on your savings is not taxed until it is withdrawn, so it’s important to leave your savings untouched if possible. You can always withdraw some if you need it but withdrawing all at once reduces the amount of time the interest has to work for you.
If you think it’s important to have some financial security, then it’s important to have some rainy day money set aside for unexpected expenses like medical bills and car repairs.
The idea of saving for a rainy day probably dates back to our ancestors who would have had to lay up food and fuel during the summer months. If they did not, they could face starvation in the winter.
Today, we do not suffer from such extremes of feast or famine. Nonetheless, we can still benefit from laying up resources for when we need them most. The key is to have a nest egg, something to fall back on if things go wrong.
We are all familiar with stories of those that have lost their jobs suddenly and unexpectedly. In order to survive, they would have had to call upon savings: money set aside for just such an eventuality, perhaps months or years before.
Wealth is all about having options. Money can buy you two things: time and freedom. If you save money it is because you want more of both in your life. In many ways, this blog is about how best to achieve that goal.”
The myth of the “starving artist” is a myth for a reason. Most artists aren’t starving, at least not from lack of income; they’re starving from lack of savings. They don’t have financial cushion to fall back on, no rainy day fund to protect them when times get tough.
The problem with this situation is that it makes artists vulnerable to any number of events which might happen in their lives. A sudden loss of income could leave them unable to cover their rent or mortgage payments, or even basic necessities like food and utilities. A medical emergency could force them into bankruptcy. A lawsuit could wipe out their savings, leaving them homeless and destitute.
One way to solve this problem is to develop multiple sources of income, so that if one source dries up (a client goes bankrupt, an outlet folds) you have others you can rely on. But another approach is to save money – a lot of money – so that if disaster strikes, you are prepared for it. Savings are like insurance: they cost you something now (your time and energy, as well as actual cash), but in the event of disaster they can save you from ruin.
It’s amazing how much a person can save over their lifetime by saving money from $10,000 to $100,000 and beyond.
Diversification is a method of risk management, it is a way to spread out your bets so that you don’t lose all your money when the market crashes. If you put all your cash in one stock and it goes down 50% you lose 50% of your money. If you put 10 stocks in and only 1 goes down by 50% you still only lost 5% of your investment.
The main reason for diversification is to reduce volatility which means that over time you are less likely to experience large gains and losses. Small losses will not kill off your account as they do with risky traders.
For example, let’s say you have £100,000 in the bank earning 2% interest per year. After 5 years that would be £110,000. Now let’s say you had £50,000 in the bank and £50,000 invested in 10 different stocks. If on average those stocks earn 4% per year then after 5 years you will also have £110,000 but there will obviously be much more volatility along the way than if they were just placed in the bank.
The thing is, with most investments it is impossible to eliminate volatility completely so one must learn to accept this as part of investing and therefore having a well-d