Whatever stage you are at in your financial planning journey, you can’t go wrong with a resolution to save more.
The beginning of January usually heralds a flurry of good intentions, followed swiftly by a good dose of self-flagellation and guilt as the promises you made to yourself lie in tatters, most likely because you set the bar way, way too high.
The key to keeping a resolution is to make it realistically achievable and that’s why this year you should keep your financial resolution simple. Save!
Saving can be adapted to your current circumstances. If you have no financial plan to speak of right now, your first step should be to save an emergency fund. If you’re further down the line with a good-sized emergency fund and a pension that is on track to meet your needs in retirement, you could turn your attention to savings for your child’s education.
Many people find saving really hard so here are six tips for simplifying saving.
How to save: six tips to simplify saving
1. Just make a start
Ancient Chinese philosopher and poet Lao Tzu said ‘The journey of a thousand miles begins with one step.’ And often that first step is the very hardest to take. If you aren’t already saving, the thought of having to accumulate enough money for a comfortable retirement may seem just too impossible a task and that’s often enough to make potential savers give up before they’ve even started. Don’t think too hard about the mountain you have to climb – just make a start with whatever you can afford.
2. Save regularly
Setting aside a monthly amount to save – however small – is the way to establish a habit. According to Wikipedia, a habit is a routine of behaviour that is repeated regularly and tends to occur subconsciously’. The subconscious part is important. Once you establish a habit of saving, you won’t even miss the money you’re setting aside.
3. Set a realistic monthly target
Your savings target must be easily achievable. If you have plenty of disposable income each month, it won’t be too much of a sacrifice to set aside a percentage for savings however if you find that you spend everything you earn, you will need to find ways to cut expenditure to free up cash to save. Take a look here for some ideas.
4. Save before spending
If you leave it until the end of the month to save what is left of your income, the chances are you’ll have nothing. Get into the habit of moving the amount of your monthly salary that you choose to dedicate to saving out of your current account as soon as you get paid.
5. Make it hard to access your savings
Out of sight might not mean entirely out of mind but if you have to make an extra effort to access your savings, it will certainly make you think more carefully about whether you really want to dip into them. Open a dedicated savings account which is for emergency use only and don’t have a debit card linked to it.
6. Maximise return
Once you have accumulated more than six months’ worth of essential expenditure, you should look at alternatives to easy access bank accounts for your savings. Money in the bank does not earn a good rate of interest and your money could even be losing value against inflation. There are better options out there.
When you reach this savings milestone, seek professional advice for savings vehicles which are better suited to your needs.
Finish 2022 better off than you are now by setting a new year’s resolution to save!
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