Savings are hugely beneficial. Having savings behind you can provide you with comfort, support and security, as well as opening many doors that would otherwise be closed to you. So, it’s not all too surprising that you might have decided to gather some savings yourself. Of course, if you haven’t done this before and have, instead, been living to a budget and consuming most of your disposable income on a weekly or monthly basis, you may not be sure where to start. Here’s some information that will help you to get savings under wraps before you know it!
Why Build Savings?
Now, you may be wondering why exactly you should start saving money. At the end of the day, if you create a good budget and stick to it, never exceeding your disposable income, you will avoid debt and can remain financially stable. This allows you to spend all of your disposable income each month on whatever you please without having to worry about your cash flow. This, however, only works if you’re happy to only make monthly purchases within the bracket of your disposable income and assuming you never run into any troubles or difficulties. While it’s important to be optimistic and positive minded, you do also need to be realistic, and at the end of the day, the world can be a hard place and we can all face difficulties from time to time. From redundancy or other forms of job loss to accidents, illness, bereavement and a host of other troubles, you need to make sure that you have a back up supply of cash available for a rainy day or when times get tough. Savings are also useful, as we’ve briefly touched on, for more expensive purchases. Holidays, cars, mortgage down payments and more. To get your hands on these more costly purchases, you’re going to have to save and be financial savvy.
Clearing Debts
There’s little point gathering savings if you have outstanding debts. Chances are, you’re paying interest on your debts, which means the longer they remain unpaid, the more you will pay to clear them in the long run. You need to make sure that you take steps to clear your debts, giving yourself a blank canvas to work from when it comes to building your money into a positive balance. Here are a few debt clearing tips that will help with this journey:
Clear highest interest debts first - take a look at all of the debts you have outstanding. Make sure you are aware of the interest rates being charged by each. Then, place them in order of priority, highest interest rate to lowest interest rate. Make sure to clear your debts with the highest interest rate first. This will save you more in the long run.
Pay on time - late payments tend to come hand in hand with late payment fees and penalties. Make sure that you always pay on time to avoid this. You should set up direct debits where possible to ensure that monthly payments are taken without you having to remember to pay them manually.
Commit - you need to be committed to clearing your debts. It’s no good paying off a credit card, only to bring out again for more unnecessary purchases once you have an available balance again. You need to clear your debts and then stay debt free, living within your means.
Opening a Savings Account
Once you’re debt free, it’s a good idea to open up a savings account. This will give you a space where you can store your money away, separate from your usual bank accounts. This will prevent you from dipping into your savings without realizing it. There are plenty of savings accounts out there, so look around and find which best suits your needs. Find an account with a good interest rate. This will see your savings build up faster. You should also make sure you’re aware of the terms surrounding removing your money. Some allow regular withdrawals and pay out within 24 hours. Some require more advance notice for you to withdraw your savings and may even incur fees or fines for withdrawing for a purpose not originally intended. For example, if you have a LISA to buy a house, you could find that you lose interest or experience other fines for withdrawing your money for any reason other than buying a house.
Seeking Financial Advice
Financial advice comes at a cost, but this cost could see you save a fortune or build a fortune. There are plenty of different types of financial advisors out there, so make sure you know what you’re looking for when it comes to finding the right financial planner for your needs. Set yourself some goals before getting started. Do you want to clear debt? Do you want to save for something in particular? Do you want to invest money that will grow over time? Are you looking for shorter term investments that can generate you money quickly? A financial advisor can help with all of these things. They will be able to listen to your individual wishes, survey your individual finances and other factors to give you custom advice that is tailored to your needs. This will help you to, ultimately, meet your goals faster. From investing money to simply finding the best deals, a financial advisor can really help you along the way to your goals.
Reduce Your Outgoings
To add extra money to your savings pot, you could look into reducing your outgoings. This will maximize your disposable income and give you more that you can put aside into your savings. Now, reducing non-essential outgoings is simple. You can simply survey your spending and determine what you do and don’t actually need. Got an unused subscription service showing on your monthly bank balance? Cancel your subscription. Keep buying takeaway food when you could cook at home? Remove apps like Uber Eats and Deliveroo from your phone and make sure to have groceries in order to cook healthy and delicious meals at home. What’s more difficult, but possible, to achieve is reducing your essential outgoings. Now, there are certain things you simply have to pay for in life. Energy, insurance, food, water. But that doesn’t mean you have to pay a fortune for them. Some savvy shopping can help cut these outgoings and increase your disposable income, which can then be put into savings.
Use price comparison sites - use price comparison sites to find lower cost providers when it comes to your energy bills, insurance contracts and more. Don’t be afraid to switch to a good service with a more competitive price tag.
Price match - if you particularly like your provider, contact them to see if they’ll price match any deals or offers you’ve found elsewhere. They might price match in order to keep your custom.
Own brand - consider buying unbranded or supermarket own branded products when doing your weekly or monthly food shop. In blind taste tests, people often can’t tell the difference, but you can save a lot of money opting for cheaper alternatives.
As you can see, there are countless different ways to build savings - and the best for you will depend largely on your individual circumstances. These can vary from whether you have debt or not to what you’re actually saving for. Hopefully, some of the advice outlined above will help you to build your savings as quickly and effectively as possible. Give them a try and see how you get on!