If you're struggling to save money, you're not alone. More than half of 22 to 29yr olds have no savings and those that do save, have less than £1k to meet the challenges of the 'rainy day'.
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1. Get to grips with your spending habits
Tracking your spending habits is key to understanding not only what you're spending money on but how much!
Being specific and detailed about your spending habits determines how much disposable income you have each month. Disposable income is the money you have left to spend on whatever you like after all your bills are paid.
You can think of this as pocket money but when it's gone, it's gone! Planning your spending helps to master two things;
- It curbs (unhelpful) spending habits that put you in the red each month
- It helps to build a pot of savings
Getting a grip on your spending habits is simpler than you think. One way is to keep all receipts for the next week or month, and a note on what you spend your cash on. Categorise your spending under headings such as food shopping, takeaways, gaming, clothing, commuting and so on. You can do this all on Loot too!
2. Service your debts
Sounds very formal and almost scary but 'servicing your debts' means making sure that you pay all the bills that you need to before you...
a. put anything away in a savings pot
b. spend,spend,spend for the month
Debts should be prioritised: start by making sure your rent/mortgage is paid, followed by utilities (gas, water, council tax etc.), followed by loan repayments, credit card payments and any other debts.
There are some who say that whilst you are paying debts, it is futile to save money. But as you'll see, every little helps when it comes to having a small stash of cash to call on in an emergency or when you want to plan something in the future, like a summer holiday or shopping spree.
3. Your saving money mantra is 'no amount is too small'
It's easy to assume that you have to put away significant amounts of money to make it count but the opposite is true.
There is a very old saying that your Gran has probably said a few hundred times - 'Look after the pennies and the pounds will look after themselves' - and it's true. Whether you slip a fiver into your savings once a month or £20 each week, it all adds up.
Setting yourself targets like 'I'll put half my wage away each month' may be too lofty an ambition. The key to saving money for a rainy day is to make it a habit, a routine thing that you do every week or month, whenever you have money arrive in your account.
If you have analysed what you spend and how much, you will have identified areas where you could spend less. For example, do you really need to spend all that money on takeouts? Probably not, so forsaking one take out every month and putting that money away in a savings pot is just one way of putting a little money by for later on.
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4. Put your savings on 'auto-pilot'
Just like you pay your bills online or automatically, you should do the same with your savings. Remember, it doesn't need to be a huge amount - £10 when your salary comes in, for example, could be automatically added to your savings pot - and over time it will build.
5. Get creative and savings savvy
There is no shame in being hot to trot when it comes to managing your money. Managing money is a skill everyone needs, whether they have thousands in the bank or £0.00. In fact, managing life with very little money is a skill that not every one has, so you're one step ahead already.
Getting creative about how to save money means making the most out of every quid you have;
- Shop in different stores to take advantage of their offers
- Actively look for coupons and vouchers online as well as in-store
- Set up an email account specifically for signing up to e-newsletters and the likes so you don't miss the money-off-your-first-order offers
- Consider loyalty cards, especially those where points are converted to money-off future shops etc.
- Make decisions for YOU, and not to please other people so sometimes, saying no to that take out or restaurant is the right move...
6. Get the right savings vehicle
Setting a target is a great way to commit to saving money. It can be a monetary one - 'I want £1k in a savings account by the end of the year' - or it can be a specific goal - 'I want X amount for travelling.'
When you have a clear objective to save money and cut back on your spending, you have the driver to accomplish your savings goal.
It's important to get the right savings product for you. There are loads of savings products out there from a simple savings account at a bank to online savings accounts and things like ISAs.
Before opening a savings account, check;
- How safe your money is - is it covered by the Financial Services Compensation Scheme, important for protecting your money if the firm fails?
- How easy is it to access your money - can you access it online, for example, or at a high street branch?
- The interest rate - savings interest rates have been low for the past few years but every little helps. In other words, what return can you expect on your money each year?
7. Try a 'no spend' month
You could always go 'cold turkey' when it comes to kickstarting your savings pot. A 'no spend' month is tough but doable. Once you've paid all necessary bills, you don't spend money on anything else that you don't need.
And there's the magic word - NEED! Budgeting and saving are all about understanding your needs and wants. You need food, for example, but a takeout is a want.
Creating a savings plan when you're skint means taking a real hard look at your needs and wants, your spending habits and how you will rein them in to reach your lofty saving goals. It can be done and you can do it.