Wednesday, 5 October 2016

I've been thinking: Saving to build a Nest Egg

Recently I was dreaming about saving some additional funds and was looking at "waitressing" Being female, I would not call it "waitering" or being the assistant or  being the server. Although those are good titles, I was caught up with saving my tips, in a formal way as any income from the position would have being included in my budget already, thus it could not be included as saving. Thus I considered the following:

Saving $10 per day from tips over a year and investing same in short term fixed deposits.... Now I know that in some places, there are taxes on interest income such as income tax or withholding tax if you are saving in a foreign currency. While these concepts may not appeal to some persons, there are others to whom this type of saving would appeal.

Also the deduction (of taxes) can be a benefit if your saving in a foreign currency is to facilitate a payment in the future, such as exam fees or tuition. However  there are others who prefer to pay their taxes at the latest time possible.

And then there are persons, who consider  the process of tracking the funds, converting the values to the local currency to be time consuming, while for others it may be part of taking care of themselves.

However back to saving $10 per day. In three months or ninety days, I would have saved $900.00 and so forth...

For some persons, who may be challenged cash wise  or who may be aware of the unexpected events in life occurring, they may wait until they  have saved for  half of the next month when they have additional  savings of $150, then they may open a short term deposit. The amounts of the first fixed deposit may be the full $900, or it may be split into 2 deposits of $450 or it may be one deposit of  two months savings of $600 or perhaps $750. In that way, the remainder acts as a nest egg in their account or just some back up cash, until the next deposit...... 

For some persons, the possible date of maturity of the account may impact on the placement of their fixed deposits.

Some persons  may want to stagger the dates of maturity of the accounts  to take account of the due dates of taxes, while for some, the staggering of the dates may be scheduled to periods when they may want to take a break from their everyday routine. For some, if withholding tax is applicable thirty days from the receipt of the interest, those persons may deduct the amount of tax  from the maturing deposit and roll over the net amount ...

If taxes on the receipt of interest is due in quarterly intervals, then having a deposit which matures prior to the end of the quarter may be a good idea so that the taxes may be paid in time to take account of changes in the weather and other events... For some, this may be a lot of calculations and maths, which may give them a headache.

Over time, if savings and deposits continue, the deposits may increase in number and possibly in value and one may want to reconsider the concepts employed.

It would be good to document your assumptions, your planned use of the income and the principal at the time of starting your savings and then provide updates going forward. For some persons this may act as a representation, especially if  the documents are signed, dated and names printed.

Some of the above concepts were absorbed during my career in audit, where several of the companies held deposits as part of their assets. This was a requirement by law.
Some of the above concepts were learnt during periods of consulting, from the clients where I worked and through reading posts on money on the internet and through formal learning.

copyright Jennifer Bailey & Partners -

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