Savings Log of a 26yr old on low pay

rockitup

MoneyWaster2007 wrote: »

Long time, no post...

Quick update then for those who are interested.

I sold my vw polo for £300, bought a ford puma for £650, then spent £460 on it to get it in good condition. So now I have less than when I previously posted on here, but also what I would say is a better car than the one I previously owned. So now the plan is to stick with this car for 3 years plus and get my savings back on a permanent upwards trend.

I recently read the book 'The Wealthy Barber' by David Chilton. In it, Chilton describes a savings technique which is effectually 'forced savings'. He recommends you save a minimum of 10% of your income per month and pay this amount into your pot first. For example, rather than wait until the end of the month and see what you have left, you pay yourself first and make the rest last, so that way your savings constantly rise month on month. I like this idea and have implemented it myself. The 10% is hardly noticed as being taken from you. Anyone else use this technique?

I also have different pots for different costs ie. TV licence, Dentists etc. whereby I save additional cash on top of the 10% I pay myself by working backwards from the date the cost is due to come out and then dividing that cost by the number of months until then. This way, no costs come up unexpectedly that knock you off course and make things difficult.

You have sussed out the only way to do it MW, I started doing that when I bought my first house and money was tight. You soon get used to having less dosh in your pocket to spend and it's great to watch your savings or investments grow.

The pots for fixing car and other things are a great help too. good luck with your replacement car, enjoy.

atush

MW,

I have just read your thread and I want to say Congrats!!! for not smoking (that saves you tons and your health) and for saving and being debt free!!!!

And yes, when we started saving we put 50 quid a month into an investment trut savings plan. It comes out after payday and you don't notice it isn't there! But you do notice years later when you have thousands saved ;-) this 50 became 100, then 200/m. Then there was the reg savbings plan at HSBC. Sort of a car fund if you like, so no finance for next car like you were doing. 250/m first year, then hubby started one too now 500/m. Then there was the mtg (we are a fair bit older than you have 3 boys). When rates when down 10 years ago maybe, we just kept our normal payment. We ended up overpaying by over 300/m. you just don't notice it, as you have always paid that amt yet we have paid thousands off the mtg and lowered the interest and reduced the term by years. At one point it was up to 500/m.

So, yes, saving at the beginning of the month is the way to go. It worked for us, and now we have enough to send the boys to Uni (one has already done 2 yrs all paid for by us).

So keep going and enjoy your (now no longer quite new) shirt, shoes and car! You earned them. ;-) and keep saving...............

MoneyWaster2007

Thanks for your great replies, very motivational!

Been a non smoker since January 27th and now going swimming twice per week and playing football once pw.

The car's great. The rate I am getting on my ISA isn't so great - it's 2.23% AER paid monthly, so the interest compounds, but still isn't amazing.

Since I've been debt free and saving, my money has gone up/down/up/down etc....and all I want is for it to go up up up. So now I've got the car sorted I should have no need to withdraw from my ISA

This month is very tight for cash, as there are 5 Fridays between pay cheques for me and as a result 5 rents to pay. But I will find a way to get through within my means, even if it means staying in every weekend after this one - going to wireless festival at hyde park in london on Saturday - cant wait

ampersand

'Been a non smoker since January 27th and now going swimming twice per week and playing football once pw.'
###########
mw, this is fantastic. You will be looking and feeling better on every level. We remember when you had your eye trouble and a way of passing weekends that you were clear-sighted enough to know brought downsides afterwards on several levels, financially, in morale, in not meeting Someone.

It's good that your family are on hand, alongside your successful independence.
They'll be seeing this and must be proud of you, too.

You are a catch-in-waiting......and no mistake! Have a brilliant time at the Festival, you deserve every second of it.

MoneyWaster2007

I've been looking into transferring my ISA to another bank this evening, but I've found that although most ISA providers will allow you to tranfer into them form another ISA, they will not allow transfers in from active ISAs that have been used during this tax year....

So....is it best to transfer your ISA at the beginning of the tax year when it has had no new account activity??

MoneyWaster2007

Transferred my ISA to Halifax for the 3% they offer, still waiting for them to tranfer it though

Also changed my current account to Santander for the free £100 and 5% interest

And Thursday last week was 6 months since stopped smoking

Going good

linz

Impressive MW, Ive just opened that Halifax ISA as well. Nice free £100 from Santander, and good interest too - you'll be at that £1000 mark before you know it !

edinburgher

I recently read the book 'The Wealthy Barber' by David Chilton. In it, Chilton describes a savings technique which is effectually 'forced savings'. He recommends you save a minimum of 10% of your income per month and pay this amount into your pot first. For example, rather than wait until the end of the month and see what you have left, you pay yourself first and make the rest last, so that way your savings constantly rise month on month. I like this idea and have implemented it myself. The 10% is hardly noticed as being taken from you. Anyone else use this technique?

Belated reply, but this is a fairly common idea in PF (personal finance) blogging. It is most commonly mentioned in association with another well known book 'The Richest Man in Babylon' (first published in 1926).

There are lots of ways to 'pay yourself first'. Lots of people do it by paying into a pension (as this money is taken from their salary before they get a chance to spend it) and the next easiest way would be having a standing order to your savings account set up to send a fixed payment there the day after payday.

For the most part, automating your finances like this is a healthy route to go down, as it removes the emotion from saving. Say you have £200/mth spare. In my experience, it's a lot easier to set up a standing order for £50/mth and then have £150 spare than trying to choose how much of the higher figure to save. All too often temptation gets in the way.

So yes, this is something that I've done for years. At my best I was 'paying myself' nearly 40% of my salary (although this has dropped considerably as my OH is currently unemployed).

Glad to see you're still hard at it

curlygirl1971

Hi MW

This is a great thread and its been interesting seeing your progress. You're doing fantastically well and hope you are proud of yourself.

Don't forget Cashback sites. I've also switched my CA to Santander recently to get the £100 and that lovely 5%, but I did it via Quidco who offered an additional £55

I too put money aside for annual purchases and one-offs. I started small probably when I was about 25, (ie saving up for the next years car insurance) and then if my disposable income grew I added an item to the list - I'm now in a position where I have a savings account that funds the following when I need to:-

Car Insurance, Service, Tax, MOT, Breakdown, Repairs fund
House Insurance
Opticians & Dentist
Replacement Car fund
Christmas & Birthday present fund
Holidays

I don't miss the money I set aside and it gives me peace of mind knowing I can cope with a bill. If the balance gets too high and I don't think I will need a portion of it for a while (ie If I don't expect to replace my car until 2013) then I put some of it aside into a fixed/higher rate savings account.

The next thing I did was build up savings that would cover my expenses for 9 months if I was made unemployed. And then I've got a couple of small pots just for the hell of it and because I got addicted to saving. Now, though, I don't save anything additional - but rather I divert this money into my mortgage debt. I've taken about 5 years off my mortgage so far.

Did I think I would be able to do this when I was 26/27? Nope - infact at the time I felt as if I was in really bad shape financially and felt a little panicky. I did a 10 year forecast/plan and it seemed as if I was just on a downward spiral.

But I had a reasonable plan, was prepared to live but live carefully (I'm sorry to say that this meant going out at the weekend 95% of the time driving drinking coke!) but I stuck at it and I really don't regret it. I still remember having a great time.

I've never earned a great deal but I've budgeted, planned, been frugal, avoided spending triggers, got the best deals, collected rewards, moved money to the best accounts - and that's helped me amass a nice savings pot. It's not always about how much you earn but how you manage what you have got and deciding what's important to you and knowing what's realistic. I know people that earn more and look as if they own more - but what some of them actually have is more debt.

Having said that there is a measure of luck and opportunity in my 'success'. A supportive family, learning from mine and others mistakes, small cost of living rises, a promotion, getting on the housing ladder at a good time....they've all helped.

Don't get me wrong - I don't have a fabulous house or anything. I don't own a laptop, or fancy phone (both are work's actually ), I'm allergic to taxi's and designer brands, I don't have Sky or Xbox Kinect (although I am considering getting one!), I drive a fiesta, I rarely buy DVD's or CD's.......old habits are hard to break. But I can go out for meals, I can get a nice holiday, I can buy treats for my nieces, and I go to bed at night and don't worry about what-if's anymore.

curlygirl1971

Every once in a while I read this........and it gives me a bit of a lift. Yeah it's a bit cheesy and old-fashioned, but I like the sentiment and I think it helps to have whatever motivation you can get sometimes


Saving for Greatness
by Luke Setzer
A fellow freethinker who works for World Financial Group shared this document with me.

"Your savings, believe it or not, affect the way you stand, the way you walk, the tone of your voice - in short, your physical well-being and self-confidence. A man without savings is always running. He must. He must take the first job offered, or nearly so. He sits nervously on life’s chairs because any small emergency throws him into the hands of others.

Without savings, a man must be too grateful. Gratitude is a fine thing in its place. But a constant state of gratitude is a horrible place in which to live. A man with savings can walk tall. He may appraise opportunities in a relaxed way, have time for judicious estimates and not be rushed by economic necessity.

A man with savings can afford to resign from his job if his principles so dictate - and for this reason he will never need to do so. A man who can afford to quit is much more useful to his company and therefore more readily promoted. He can afford to give his company the benefit of his most candid judgments.

A man with savings can afford the wonderful privilege of being generous in family or neighborhood emergencies. He can take the level stare of any man ... friend, stranger or enemy. That ability shapes his personality and character.

The ability to save has nothing to do with the size of income. Many high-income people spend it all. They are on a treadmill, darting through life like minnows.

The dean of American bankers, J.P. Morgan, once advised a young broker: "Take waste out of your spending; you’ll drive the haste out of your life."

If you do not need money for college, a home or retirement, then save for self-confidence. The state of your savings does have a lot to do with how tall you walk. "