My New Year’s resolution is to stop being such a disaster with money. I want to save money and stop living day to day while waiting on my next salary payment to pay my last bill. What should I do?
While a big part of learning how to save money is down to determination and resolve, there’s no harm in picking up some tricks and tips along the way.
If you want to get fit or lose weight you need to become determined to maintain and achieve targets. Finance should be treated in the same manner. Ultimately, financial planning is about tailoring a solution to meet your precise requirements. Having said this, there are a number of ‘universal’ needs that most of us face.
These money saving tips and tricks to stay on track are focused on the smaller steps that will hopefully create bigger results for your wallet which could go a long way towards your goals – whether it’s a big purchase like a new car or a smaller purchase like a weekend away.
Keep an emergency fund to cover unexpected expenses
Keep three to six months’ net annual income in an accessible deposit account for emergencies, sudden loss of income and that investment opportunity that only comes up occasionally.
Pay off any expensive personal loans and credit card debt
If you only pay the minimum balance of your credit card debt each month, it will take you up to 20 years to clear that debt! A sobering thought…
Save for cars, holidays, and so forth
Holidays come around every year so there is no point in taking out a three-year loan for your summer holiday unless you plan to sit at home for the next two years after the holiday.
Save for major purchases
Tips for Saving
Be specific: Make your savings goals as specific as possible. Otherwise, it’s very easy to end up saving little bits here and there, rather than a weekly or monthly minimum that will make a difference for you. If you are saving for a short-term goal such as a holiday, it’s quite easy to work out how much you’ll need to save each month to reach your target in time.
For longer-term or regular savings, the general guideline is to save 20pc of your monthly salary. If someone on an annual salary of €28,000 saved €380 a month, they could have accumulated €4,560 after 12 months.
It’s a good idea to have a direct debit set up the day after you get paid – this way it’s as if you never had that money in the first place and you won’t notice when it’s gone. It’s called paying yourself first.
Record your expenditures and create a budget: Note down your expenditures over a month. Add up the cost of all the non-essential items on the list to see exactly how much you could save with just some small changes. After recording your outgoings, create a budget that cuts out unnecessary costs. Remember to include your savings as a monthly bill that needs to be paid.
Make small changes:
Throw your daily/weekly loose change from your wallet into a jar. Just €2 a week is worth €104 annually without much thought.
Use cash over cards:
It’s very easy to spend more than you need or budget for, if you can’t physically see the money disappear. On the day you are paid, take out your budgeted monthly spending money in cash and split it up into four weekly portions. As much as possible, make your purchases with this cash, it will help you to keep an eye on what you can and cannot afford to buy.
Start thinking in terms of needs vs wants:
A good way to break unnecessary spending habits is to check with yourself if what you are about to purchase is actually a need, or just a want.
Write down your motivation:
If you are savings for a specific thing, it’s highly motivational to keep a reminder of this around you.
Keep track of your savings:
Every month, check in on your savings amount. It’s easy to lose motivation, but to see the money building up can encourage you to keep going.
Finally:
Ask your Financial Broker or contact me for further information on any of the above