Finally saving -where to begin??

Hi everyone

After finally clearing our credit card, apart from our mortgage my husband and I currently have no debt :j We have recently started using YNAB & find it brilliant for keeping us on track with our day to day budgeting and saving for bills. So we are now thankfully in a good position to start saving regularly after many years of frivolous spending.

My question is what do we need to prioritise in regards to saving? As per YNAB we would love to get ahead of ourselves & stop living pay cheque to pay cheque so saving one month's salary at least should be our first priority? Then should we save for an emergency fund? How much should this be? We also want to save for home improvements (this will cost quite a bit as we have a relatively new but unfinished house so we could possibly be looking at €20k), changing our car, holidays and have long term savings. How do I decide which to save for first? We can afford to save approx €1000 per month. Should I break that down & save a smaller amount for each saving goal every month or save enough for goal 1 and then move onto goal 2? I feel a bit overwhelmed by all we want to save for and what is our best plan of action.

I would love your advice please :)

Comments

  • george4064
    george4064 Posts: 2,803
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    My question is what do we need to prioritise in regards to saving?

    This depends on your financial objectives and goals.
    As per YNAB we would love to get ahead of ourselves & stop living pay cheque to pay cheque so saving one month's salary at least should be our first priority? Then should we save for an emergency fund? How much should this be?

    Correct - your first priority should be to save up an emergency fund. There is no set amount for an emergency fund, but some people aim to save up anywhere between 3 to 6 months expenses. (i.e. if you lost all your income you would be able to live for X number of months using the cash you have saved).
    We also want to save for home improvements (this will cost quite a bit as we have a relatively new but unfinished house so we could possibly be looking at €20k), changing our car, holidays and have long term savings. How do I decide which to save for first? We can afford to save approx €1000 per month. Should I break that down & save a smaller amount for each saving goal every month or save enough for goal 1 and then move onto goal 2? I feel a bit overwhelmed by all we want to save for and what is our best plan of action.

    You need to look at your financial objectives and prioritise them accordingly. Some people have two sets of objectives, one a more 'required' list and the other being a 'nice to have' list.

    In terms of where to save your money, I strongly recommend reading this helpful webpage: http://www.moneysavingexpert.com/savings/savings-accounts-best-interest?_ga=2.71525968.2125754204.1508142882-1522948802.1504528736
    "If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes” Warren Buffett

    Save £12k in 2021 - #027 £15,268 (76%)
  • atush
    atush Posts: 18,719
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    Have you joined your employers pension?

    If so, and are contributing enough to gain their max contribs, you should address the emerency pot. Which will be initally the same 1 month salary pot. then increase this to 3 months, then save for the house on top of this.
  • Eco_Miser
    Eco_Miser Posts: 4,708
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    Dot_Cotton wrote: »
    How do I decide which to save for first? We can afford to save approx €1000 per month. Should I break that down & save a smaller amount for each saving goal every month or save enough for goal 1 and then move onto goal 2? I feel a bit overwhelmed by all we want to save for and what is our best plan of action.
    This is where goal-based planning breaks down. I just save and allocated the saved amount as needed.

    Generally, save towards all your goals, dividing the (remaining) target amount by the number of months until required (or expected annual expenditure by 12), but be prepared to be flexible.
    Eco Miser
    Saving money for well over half a century
  • xylophone
    xylophone Posts: 44,140
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    You might use Nationwide sole/sole/joint Flexdirect accounts and Flexclusive regular savers to build your emergency fund.

    You might open a Santander 123 Lite to get the cash back then after the first year with the Flexdirect (s), convert the Lite to a full 123 and transfer in the money accumulated in the Flexdirect(s) to keep your emergency cash earning some interest and readily accessible.
  • Thanks George4064, I was thinking along the lines of 1 months salary to get ahead & then a 3 month emergency fund. I guess the sensible thing would be to have that 4 month savings in place before we start saving for anything else?

    Thanks atush. My husband is a director of his own company & we have an appointment set up to get his pension going. He will be able to contribute the max amounts & the company will match this. I have a small public sector pension but I'm currently not paying into it as I'm off work on a career break to look after our young kids.

    Eco miser I'm not sure I understand what you mean. Would you mind clarifying please?

    Thanks xylophone for the references but we don't live in the UK. I have come across a savings account that pays 3% interest if you save monthly for 1 year. You are allowed 1 withdrawal in the year. I'm not sure if we are in a position yet to lock away our money though? If I saved the €1k per month then I'd have €12k after 1 year plus interest. Would it be foolish to do this & then transfer our salary buffer & emergency fund to a more accessible account OR should I just save into our current account, forego any interest & have the money available at a moment's notice? I'm afraid if it's too accessible then we could dip into it too easily.

    Many thanks to you all. I really appreciate your advice :)
  • richyg
    richyg Posts: 148 Forumite
    Hi,

    If you are following the YNAB principles then you shoudn't be stealing/using money that is simply available.

    As you know it is zero cost budgetting or envelope budgetting.

    Set yourself some new categories to account for any extra money and keep with that scenario.

    In the end the money is just money. The pound coin doesnt care what you do with it. However YNAB in principle gives it a job to do and if you follow that you should be able to combine it with other pots and put it into some form on interest account while accounting for its purpose in YNAB.
  • xylophone
    xylophone Posts: 44,140
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    As non residents you may well find that it is not easy to open UK bank/savings accounts.
  • Eco_Miser
    Eco_Miser Posts: 4,708
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    Dot_Cotton wrote: »
    Eco miser I'm not sure I understand what you mean. Would you mind clarifying please?
    Which bit?
    The first line: It's all your money, and you can do something different with it than you intended.
    Example: You save for a holiday, but the roof blows off in an ex-hurricane. You use the holiday money to repair the roof.
    I just save and use some of the savings to replace the roof, or the washing machine, or take a holiday, without having specified what I'm saving for.

    The second line: if you're going to budget, budget and save for everything.
    Calculate how much you need to save each month towards each goal, to have sufficient for the goal at the time it is required.

    If the sum of these is more than you intend saving, revise your plans; if it is less, then save the difference to the emergency fund.

    Since you're just starting out:
    • first get that month's expenditure as a float so you're not depending on the pay-cheque arriving on time, keep this in your current account
    • then get another several month's expenditure to cover either a period of not earning, or emergency expenditure, or a source of cash for other expenditure (covered by savings you've put in an account that needs some notice), keep this in an instant access account that earns interest, if you can (may be a current account).
    • When you've the first two covered, you can save for all the rest, and since you've got a cash float, you can put this into higher interest accounts that need notice, or are locked until a certain date.
    • Don't forget the really long term saving in a pension scheme, and maybe stock market investments (since you're not in the UK, ISAs don't apply, are there any tax exemption or deferral schemes in your country?)
    Eco Miser
    Saving money for well over half a century
  • Thanks for your replied guys. Sorry I don't know how to quote!

    Richyg the money is there available as it's money left over after we have our bills paid. We are not stealing from any other account. I know YNAB would prefer us to keep all our money in one account & use the budget to track but I feel uncomfortable about this as if (in time hopefully) we will have €20k saved I'd prefer some portion of it in a savings account earning some interest rather than in a zero interest rate current account where it could also be open to us dipping in to it or anyone else if our cards got done. I'm still going to have a category for it in my budget so I can track it that way.

    Thanks xylophone but the account I was referring to is not a UK account. Sorry I should have said that :)

    Eco miser thank you so much for such a detailed reply. That breakdown is exactly what I need as to what to do first & follow on from there. I guess we need a little hand holding to get us started :)

    Roll on next month's pay cheque so we can begin. Is it sad to be excited about saving??!!!

    Thanks to you all for your help :)
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