You are displaying a utf-8 encoded file with a iso-8859-1 view. Usually you want to see just one character, but why do you see two instead of one? This is because in utf-8 a german small 'a' letter with 'two dots' is a 2-byte sequence with utf-8 (0xC3 and 0xA4). If this gets NOT displayed as utf-8 but as iso-8859-1 encoding - which means one byte one character - you'll get that what you have mentioned. You'll get the startbyte 0xC3 as a single iso-8859-1 character and the following byte 0xA4 as as a single iso-8859-1 character. In utf-8 this 2-byte sequence must become decoded by extracting the payload bits of the startbyte and the following byte like this:
Startbyte: 11000011
Following: 10100100
So 110 of the startbyte must get stripped off, so 11 is left. So 10 of the following byte must get stripped off, so 100100 is left.
Chained together this becomes 11100100 which is decimal 228 which should be equal to the german character 'a with two dots' unicode codepoint.
I recommend to let the encoding as it is, utf-8. It is just the encoding of your viewer/editor that should display utf-8 encoded files as utf-8 and not as iso-8859-1. Configure your viewer/editor with utf-8. In other words, configure the viewer's/editor's encoding according to the encoding of the file's content (which is in your case utf-8 and NOT iso-8859-1).
To convert your files or check them for a certain encoding, just use madedit. madedit has a built-in hex-editor which wraps a rectangle around utf-8 sequences, displaying just one character on the right side (the encoded codepoint). It's easy to identify single-byte characters and/or 2/3/4-byte sequences within utf-8 encoded files. It also wraps a rectangle around the 3-byte utf-8 BOM (if any).