Saving your money is one of the most beneficial things you can do for your financial freedom and independence. Yet sometimes, the hardest part is just getting started. If you want to start saving for your retirement or a house but you’re not sure how, it can be really intimidating. These are big, life-altering decisions that might seem so far away, but it’s never too early to be financially stable.
To learn how to start saving money successfully, check out these eight tips that will help you in getting one step closer to your savings goals. Where to start?
Eliminate your debt
Apart from being a massive weight off your shoulders, paying off your debt first will actually save you money. Credit cards and overdrafts usually come with a charge, and that charge could be going towards your future savings goals. If you’re in debt, add up how much you spend being charged interest per month and how much that equates to over the year. You’ll quickly see why paying off your debt first is a good idea. Using what would have been your savings to pay off debt can be a tough pill to swallow, but your future self will thank you.
If you’re considering taking out a loan to pay off your debt, look for one with a low interest rate so you don’t end up owing more. Many lenders charge interest rates of 1000% APR and above. At Salad Money, however, we offer fair, affordable loans for NHS staff and public sector workers.
Make a plan!
It’s important to establish a timeframe and a savings goal to keep you motivated and focussed. Most of us are more motivated when we’re challenged and if we give ourselves a goal, then we have something to work towards. Make sure that this goal isn’t too unrealistic, it needs to be a challenge, but too high expectations leave us feeling depleted and unmotivated. It’s really important to know how much you can realistically save each week, month, and year.
Budget for savings goals and cut back on spending
To know how much you can realistically save a month, you need to work out what you will be left with after all your fixed expenditures go out. This could be rent, car insurance, gym membership, Netflix subscription, utility bills, council tax, etc. Then, estimate how much you would spend on your day-to-day expenses such as food, petrol, and socialising. Going through your monthly expenses might reveal old or forgotten subscriptions you can now do without!
Sometimes, you must be ruthless with yourself. At the time, that £6 Uber seems worth it. Besides, it’s only £6, right? However, these small, seemingly harmless payments soon add up. You prepare for the big payments, but no one prepares for the small but frequent expenses. Cutting back on frivolous spending can help you achieve your spending goals quicker. You’ll realise that you’re spending less and less each month and consequently you’re able to put more money in your savings accounts.
You might also want to consider setting a budget for your food shop, too — it’s a great way to save money and eat well.
If you’re really dedicated, every time you want to buy something, but you choose a more affordable option instead, you could put the equivalent of what you would have spent into a savings account. For example, if you make your lunch rather than buying it, or you refrain from spending £4 on a coffee, transfer that amount to your savings account. If you spend around £20 a week on lunch at work, and there are approximately 48 working weeks, that’s £960 a year on just lunch!
You may have a big savings goal in mind, but trying to get to that large number in one fell swoop can be daunting. Begin by transferring small amounts into your savings account and increase as you become more confident with your budgeting. Every little helps!
Set up the right savings account for you
It might seem obvious, but all the cutting back and setting goals will be in vain without a savings account. Make sure that your savings are separate from your current account, to avoid temptation.
In terms of ensuring it’s the right one for you, the most beneficial savings account will differ depending on your end goal. Is it long-term or short-term? Saving for a holiday would probably take around 6 months of dedication, depending on where you’re going and how much you’re planning on spending.
Saving for a mortgage, however, is likely to take years. It will also be a larger amount than you’d typically save for a holiday. Many banks likely offer specific savings accounts for mortgages to ensure you get the best possible interest rates. Mortgage deposits are not cheap, you want to take the help where you can get it!
Other factors include service fees and minimum balances, so make sure you do your research to know you’re getting the best option (and interest rates) for your goals.
Set up an emergency fund
If you’re saving up for something in particular, it’s a good idea to have a separate emergency fund. Often, the account holder will have to wait a certain amount of time to withdraw the money from their savings account. That’s not exactly ideal in an emergency.
Even if your savings account offers instant withdrawals, it’s still a good idea to set up a ‘rainy day’ fund. If you’re saving money for something specific and an emergency does happen, the last thing you want is to spend your savings on that. Spending a large amount of money on something practical is so much more painful than spending it on something fun.
Be smart with standing orders
It’s great to deposit ‘X’ amount into your savings every now and again, but to really see your savings soar, a standing order is the way to go. This goes for both your general savings, and your emergency fund. Some banks offer ‘jam jar’ savings accounts which are ideal for creating an emergency fund. You can set up a standing order, you’re likely to forget it’s there so the payments build up, then simply withdraw from it whenever you need.
Make sure you pay yourself first! Get those standing orders set up to go out on or just after payday. This ensures that you will definitely have the money for it and that you know what you’re working with for the rest of the month. The further you get into the month, the more the savings money begins to blend in with the rest of your expenses.
Consider extra help with Salad Money
We know that saving money can be challenging, especially when the outgoings and unexpected payments seem never ending. If it isn’t a new school uniform for the kids, it’s a particularly expensive MOT. Sometimes, money issues pile on top of us and they can become excruciatingly suffocating. If this is weighing on you, you could consider a small, personal loan.
At Salad Money, we offer fair and affordable lending for NHS and public sector workers who need help fast. Once a loan application is accepted, the money will be paid into your account the following day. That way, money troubles can be put to one side as quickly as possible, and you can relax. We will only lend you what you can realistically pay back, and our loans will never affect your credit score. If you want to discuss your options, please get in touch.