I think it’s clear that saving regularly is sensible – you never know when you might need to call on some extra cash whether to fix your car, replace your boiler or even take advantage of an unexpected opportunity. But when finances are tight, it’s one of those things that is easier said than done. However, there are actions that you can take to make saving a bit easier and a bit less painful. Here, Jonathan Sidlin, the financial planner and managing director of HSC Financial Advisers
Assess your outgoings
The very first thing you should do is to make an accurate assessment of your fixed outgoings, things such as mortgage or rent, energy, food, clothing and then decide how much extra you need for leisure activities. Then take a look at hobbies and expenses relating to them and the amount of money needed for ad hoc events. Once you have a good idea of your monthly outlays you can move on to the next step.
Set a savings budget
Having ascertained what is needed for a comfortable lifestyle, you are in a position to set yourself a budget for monthly savings. This is where you need to be honest with yourself. If you are going to succeed at saving regularly, the sum you save must be realistic. It’s easy to be frugal for a short period of time but it soon starts to feel constricting and unsustainable. For long term saving and to build good habits that will stick, it’s essential that the amount you decide on is manageable month on month.
The good news is that, having decided on a reasonable sum for savings, you can set up a direct debit to leave your account immediately after payday. This way your savings become simply another deduction from your salary and as such shouldn’t be missed. This savings sum can either be moved into a savings account or directly into investments.
Use cash
Even after you have set up regular savings, it is still possible to making savings in your day to day activities. We have all got into the habit of simply tapping a card to pay for every purchase, no matter how small, but try taking some cash out, for example £50, and use that to pay for all your incidental expenses. You may be surprised at how little time that cash lasts. It can be quite an eye opener to truly understand how much you are spending on lunches and coffees. You may then decide that there are big savings to be made by making your own lunch, or restricting the number of times you buy a takeaway coffee.
Restrict online spending
Another area where it is easy to overspend is online purchases, as the money doesn’t actually pass through your hands, this spending can be instantly forgotten. Set yourself a budget for weekly online spending on ASOS/Amazon etc. And make sure you actually stick to it by making a note every time you buy something, so you can keep track!
This is information only and does not constitute advice. Pensions/investments are medium to long term plans and are not guaranteed as past performance is not necessarily a guide to future performance. The value of units can go down as well as up. Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from, taxation are subject to change.
