2020 has taught us a lot, not just about hygiene and society but about our personal finances. Our tips on where to start saving money could help you build an emergency fund if you ever have to rely on it in the future.
Building a savings plan could also help you towards your financial goals of buying a car, saving for a house deposit or going on a trip when the world is in better shape.
1. An open and honest review of your spending
An open and honest look at your spending habits can be the main thing deterring people from hitting their savings goals. We know it can be quite daunting but there’s no judgement, and it’s the first step to creating some healthy savings habits.
Looking at what you spend on a certain expense as a totalper week, fortnight or month could help you uncover some opportunities to review and even cut back. That extra money you’re saving could then go directly into your savings account.
A review of your living expenses could also give you opportunities to shop around for better deals on your electricity, gas, internet or mobile phone providers.
You don’t have to be an Excel spreadsheet wiz to work out where your money is going and when. Let us do the work for you with our online budget planner.
2. Plan and budget to eliminate bill fear
So what do you do with the information from your spending review? You can prioritise, create a budget and separate your money.
Of course, your spending priorities are up to you, but you can count on your recurring expenses like your bills hitting your email inbox each month. You’re probably reading this because you want to make saving a priority, but you also want to continue enjoying life’s pleasures.
Now that you have a better idea of what money’s going where, work out how much you’re spending on expenses per year. Working annually, you can then break it down to how much you need to put aside each pay.
The money left can form your savings and spending money, divided however you like or however you feel is achievable.
A way you could determine how much you put into your savings account each pay is by setting some goals on what you’re saving towards. That doesn’t have to be anything big. It could simply be to have money put aside for a rainy day.
3. Automate it
You have the information you need, your priorities are sorted, now’s time to let it take care of itself.
We have a range of transaction and savings accounts to suit your spending habits or what you’re using the account for.
A dedicated savings account that rewards you for sticking to your goals with bonus interest could be a great place to start. But if nothing else, seeing a separate balance for your savings can be a great motivator, especially when it continues to grow overtime. It may also mean you’re not as tempted to spend that money.
Setting up automatic transfers for specific amounts of money to your bills and savings accounts means you won’t have to think about it every time you’re paid.
And if priorities change, like we know they can, all you have to do is change the amount that is moved between your accounts depending on your priorities.
4. Re-prioritising your budget
While you may have a budget or plan in place, that’s not to say it can’t change, and most probably will due to factors you can and can’t control. In these instances, you may have to reprioritise your saving goals to cover more of the bills, or you might not be spending as much on daily expenses because you’re not leaving the house.
As examples that affected everyone during and beyond the coronavirus impacts, gym memberships and public transport probably weren’t as high a priority so temporarily, this money could have been reprioritised towards your bills or savings. The point is, sometimes you might have to put your money where it’s needed most, not where you most want to spend it.
All the above steps are about building stronger saving habits and knowing what your money is going towards. You’ll then have the knowledge of where to make changes if you can and have to.
You shouldn’t feel guilty about deviating from your budget in a normal world either – that’s not why we put budgets in place. Having a clear set of priorities means that if you do have to (or want to) make a purchase out of your savings you’ll know how that will affect your end goal and where you need to make it up in the future if you want to or can.
This article is for information only and is not intended to provide financial product advice. Any advice is general and does not take account of your objectives, financial situation or needs, so you should consider if it is appropriate for you. Before acquiring any products from us you should read the product disclosure statement or other applicable disclosure documents and terms and conditions which are available on our website.
Any views expressed are the views of People’s Choice Credit Union solely. This information must not be relied on as a substitute for financial planning, legal, tax or other professional advice.