Effective saving - how do you manage it? Also, tips to improve credit score?

:-_11

Hello all,

I've recently started my life after university and my current goal is to save up a minimum of £10,000 (probably would aim for £15,000) with the intent of using as a mortgage deposit.

I am currently sitting at around £3,200 - £3,500 but it's taking so long. Saving is very restrictive on being social - I find that I'm having to say no to my friends on the majority of times they want to do something. I see so many successful savers on these forums - do you all aim to strike a balance between hardcore saving and enjoying yourself? Or do you all just be strict with the end goal in mind?

On a side note, I want to bring my credit rating up - sitting just under 800 (on Experian's score system) which is telling me this is average. I would like to sit in the top tier before applying for a mortgage - what are the best ways to improve this?

I have read that a credit card can help with this? I've never had a credit card and I don't see how I could effectively use one if I am trying to save.

Does having an overdraft (even though it is untouched) act negatively towards the credit score? I notice that a loan I have is also displayed in my credit report - would paying this off in full (and as a result deplete my savings) give me a better rating? I've never missed any payments on any loans/direct debits.

Thank you for any help!

matttye

A credit card will help you to save and also improve your creditworthiness if used responsibly. Make all purchases on your credit card and repay it in full every month. You will not be charged any interest, but will instead earn interest on the money in your current account/savings account that you haven't had to spend because you've used the credit card.

If you're able to get a 0% credit card, rather than pay off in full every month just pay the minimum payment each month and you'll make even more money off the interest.

Would strongly recommend you don't pay any attention to the garbage credit scores supplied by the likes of Experian, Equifax and Noddle. None of them actually lend money and they don't take your income, employment etc. into account.

Debts in themselves are not necessarily negative, but lenders will consider how much credit you have already available when deciding whether to lend to you or not... so if your loan and overdraft (even if unused) add up to a high % of what you're earning, this could result in you being declined because lenders think you already have enough available credit.

Eponym

Surely you are paying more interest on your loan than you're making on your savings?

As someone who went to university, my advice is to be frugal where possible, but dont miss out on experiences. Have fewer drinks when you go out, choose a cheaper option from the menu, but don't not do anything. These are the best years of your life, don't miss out.

racing_blue

:-/ wrote: »

Hello all,

I've recently started my life after university and my current goal is to save up a minimum of £10,000 (probably would aim for £15,000) with the intent of using as a mortgage deposit.

I am currently sitting at around £3,200 - £3,500 but it's taking so long. Saving is very restrictive on being social - I find that I'm having to say no to my friends on the majority of times they want to do something. I see so many successful savers on these forums - do you all aim to strike a balance between hardcore saving and enjoying yourself? Or do you all just be strict with the end goal in mind?

If you are recently out of university, I expect there is a lot of headroom in your earning potential? People can only save a lot if their income is sufficient to allow them to do so.

Avoiding consumer debt is hugely important. It leads to negative income in the form of interest & must be repaid. Just take a look at the debt free wannabe board- bad stuff.

If you never have debt, and can avoid "lifestyle creep" as your income rises, saving is the automatic result

snowgo

You seem to be asking for some suggestions about how to balance cost of social activities with saving. In your position I would sit myself down with pen & paper (or laptop & blank document) and do an analysis of my social activities. I’d list all the things I might want to be involved in during the next 12 months and I’d give two ratings to each (score out of 10) for (1) how much I would enjoy the experience (2) how much it could potentially enhance my life and life goals. I’d then combine these to give one score. Either by adding them together (equal weighting) or in some other proportion. So if you think life enhancement should be more important to you than enjoyment, then might be weighted higher. In doing these ratings, I’d also keep in mind how activities might impact on other important things. For example, it might be important (& hence life enhancing) to be doing things with girlfriend in order to keep that relationship strong. I’d list both regular activities – drinks with mates, cinema, etc – and one-offs such as holiday or summer music festival.

Having done that I’d list the activities in order of rating, with highest first and make a guesstimate at the cost of that item for the year. You’ll have to bear in mind frequency of the activity in doing this. So a weekly drink at the pub with mates, could add up to similar cost as a one-off holiday away in the summer.

Now comes the really hard bit. Make a guess at the sort of budget you want to set yourself for entertainment & social activities for the year. It is easier to do this after you have rated all your activities and costed them, as it sort of gives you a perspective on what the different things cost. Try to avoid extremes in your budget setting. Engaging in very little social activity increases risk of isolation, miserableness and is difficult to stick to. But being extravagant means that it will take you longer to achieve your other goals, such as saving for a mortgage.

Then having set yourself an annual budget, circle on your list of activities those that you are going to plan to engage in. Or work out some compromise, that fits your budget, if you want to do a bit of different things. For example you might switch to going to the pub with mates once a month, rather than every week, in order to allow you to fund that holiday in the summer or trip to the music festival.

Then having set a nominal entertainment budget for the year, I’d put it into practice. The way I do it is by transferring so much every month for entertainment/social expenses into a separate bank/saving account and tracking my spending on a spread sheet or budget calculator. (I use the homebudget app on my phone, which I find great for budget setting and tracking spending in relation to expense categories you can set on it. But I also use a spreadsheet for some things where more detailed analysis helps me).

Sorry if this all sounds more complicated than perhaps you were looking for, it’s just a suggestion regarding how I’d go about tackling it. It allows for planning in advance the sort of activities that you are going to do (& those you’re not) which I finds helps in sticking to a plan, but it still allows some flexibility for swapping activities if unexpected opportunities crop up.

You might also want to consider the “Save £12000 in 2013” thread in this forum for support & advice from others who are also trying to save. Although it kicked off in January, you can join in at any time throughout the year. And you don’t have to aim to be saving £12000 – you can aim for any amount. Small amount savers are welcome too.

atush

Some sensible advice above, always balance saving with social acitivites/life unless you are in HUGE debt.

Also, paying off debt (unless cheap debt such as a mtg or older student loans as opposed to the new 6%+ ones) before saving is wise. So yes, pay off your loan before saving.

Further saving, look at essential/leasure expenditure and se if any can be made via a cashback website. I use my cashback (approx 240 last year) to fund my leisure activities. Sell anything you don't need/use on ebay, have you sold your old textbooks on amazon?

Credit score. Yes, having and using a CC will help you score. And yes, you can use one even if you are saving. Use a cashback card for all normal day to day spending, and pay it off at the end of the month. Or use one that give free stuff you actually need like Tesco vouchers or Amazon vouchers etc.

Another credit score tip is to join the electoral roll where you now live after uni.

:-_11

First off - thank you all for the very imformative replies. I appreciate the effort!

Matttye; I am considering using a credit card for this purpose - lots of transactions with no payments missed so that this builds up a large history of credit and then cleared payments. I dont know the ins and outs with the variety of cards out there but I guess all the information is available out there.

If we are talking numbers then the remainder of the loan is approximately £950 and the overdraft is £2,000 (it does seem like overkill now but this was a life saver in my final years at university) so that is almost a £3,000 swing in credit that I already 'have'? So I should just completely remove the overdraft and clear the loan, giving me £0 in 'owned' credit? And to maintain a history of good payments I use the credit card in every circumstance that I would normally use my debit card?

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Eponym; I understand that and I do not ignore the fact I'm not getting any younger [26 years old] so I should experience life a bit more but I believe that viewpoint is a double edged sword in my eyes at least. The longer it takes for me to save a deposit the longer I am at home. When all my peers (with the exception of 1) have all moved out from living with family and now claim their independance I feel like I should be on a similar par. I feel I already am too old to be at home but I have been a student for the past number of years so that was always my reason. It's not a straightforward topic thats for sure, there are very valid reasons for both saving and for enjoying my money and as you can tell with this thread I cannot decide what to do!

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Racing blue; Yes there is a lot of room, I do not have many financial commitments and certainly no large monthly payments (£200+). I have the usual out goings like mobile sim contract and the monthly pass for public transport to work etc. As stated above my loan is approx £950 ish to clear [ or ~£100/m] so I do have enough cash to clear this now. I do believe the lifestyle creep has started to settle in though as there have been instances where on impulse I have decided "well I earn a good wage so why not" but those haven't been frequent and I believe that mindset hasn't fully bedded yet so I can unlearn that thought process I think.

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Snowgo; Wow - that is a very detailed plan. I have never thought about calculating potential activities and resulting costs for the year. This year can be relatively easy as I do not plan to go on holiday so thats saved a large amount of money right away. I would need to give it the attention it deserves so I will need to have a look into it at the weekend. I do plan on creating a new account purely for saving so that it is separate to my current account to avoid any temptation. I do not believe a savings account will benefit me much though as I don't plan to save the money for a large period of time (10-14 months max I estimate).

I have browsed that thread and admire the effort and results people have produced. The commitment on these forums give the illusion that saving a large percentage of income is easy!

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Atush; Ahhh - cashback websites. I believe I have used Quidco a few years back but with the time it had taken to clear etc I stopped bothering. I guess because I haven't been spending much I never really seriously consider using these sites for any real cashback gains. I will definitely have this in mind from now on though as I never had thought these sites could be at all fruitful. Also, there weren't many textbooks - mostly notes in online databases so I have already saved the money as I had no need to buy many books!

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Thanks again to all of you for the input.

atush

0if your overdraft is still interest free, keep it unitl it isn't

If using a CC, use a cashback one.

\Use topcashback over quidco as there is no annual fee