Attitudes to Saving

matchboxfull

First off, I just want to explain that I have put this in the DFW part of the board because I am interested in people's overall attitudes to their budgeting, rather than specific products that are talked about in the Savings section, but feel free to move it. It would also be interesting to hear from people who are either debt-free after paying it off, or who are saving alongside paying down debt. Basically, anyone who is going through a process - like I am - of changing their attitude to money.

Anyway, my question was, how do you portion up your savings?

Saving is quite alien to me, but having become DF within the last year, I now feel that I need to have a plan. An 'Ultimate Rainy Day Fund' would be about six month's outgoings, but that's going to take an awful long time to achieve. It also seems to me that there are interim stages on the way (ie. 3 month's housing costs, 6 month's housing costs, 3 month's out goings etc.)

But then what about a kind of 'Things Going Bang Fund'? Should that be separate or part of one big pot? And then there are predictable expenses like Christmas, birthdays, holidays. One of my issues is that our income is very variable from month to month.

So how do you guys do it? How do you section out savings (if at all)? And how do you balance it all with day-to-day living?

FinallyGettingFree

Hey Matchboxfull

I have:
- a mini emergency fund (currently only 250 in this, but increasing every month)
- a month's worth of income (adding more to this monthly to get it up to 6 months eventually)
- savings for specific annual events (Christmas, annual holiday) that I add to every month
- savings for specific things (new bike, new laptop etc) that I add to as and when I have the cash
- long-term savings that I won't need to touch until retirement if I have the emergency fund and income savings in place

Because I use YNAB it is really easy to see these in separate categories, so they don't get mixed up together even tho they are currently all in the same current account!

CalumHeath

I did start to write a response but it started to read like a 'how to save' and when I read it back it sounded patronising.

Here's my second attempt, which only describes how I do it.

I try to save as much as I can all of the time.

Every month has to be about paying every priority bill: gas, electricity, council tax etc. Once these are allocated (I have a spreadsheet always a year ahead) I consider every penny left to be the intended amount I save for that month. I approach it this way because when I do decide (whether it's need or want) to spend anything, I apply it to the spreadsheet and can SEE the effect it has in the long term. I find this really helps me think long and hard about the effects of my spending (and saving).

I suppose it's a game I like to play against myself: set a figure to save and see in reality how close I actually got to it; some months it's more and some (most) it's less but what's important is that I do save and I can track the money I do spend.

As a side note, if my intended saving amount has taken a hit (for any reason), I like to try and make it up in other areas: for example, spend less on a purchase I'd planned or sell something on eBay or Gumtree to get the ACTUAL saving figure closer to the one I'd budgeted for.

And that's it really: in summary my default position is to save (after essentials) and work backwards from that.

andyfromotley

I am building my EF and nearly at £1000. This will always be left alone sitting there for when things go bang as you beautifully put it!

I save each month for forseeable big spends, Christmas, Birthdays, Holidays, etc.

I also save each nonth for annual bills, travel insurance, car insurance, house insurance, car servicing, etc. (i am determined to be able to pay for all of these in advance in one go as it generally makes them MUCH cheaper.

Beyond that everything goes on my debt. When that is clear i will start funding my much longer savings goals. House improvement, car replacement etc.

I am not worried too much about having much more than a month in reserve built up as i am on a Govt backed employee pension. If they stop paying them for more than a month then we are all going to be in unimaginable trouble!

Not sure that theres anything special about how i do it. I also use ynab which makes keeping track of how much i have in each pot super easy. I do keep the EF, Christmas fund and Holiday fund in seperate savings accounts but with YNAB there is no need to. I could easily keep it all in my bank account without losing track of it. I just like the feel of it sitting in seperate accounts!

northerner999

I save as much as I can in emergency fund, then use this when 0% deals run out. I have always transferred any remaining balance to a new deal and started the process again. Even if I wiped out my emergency fund, I've known I can stick aside a few hundred a month by living in a MSE-approved way so never worried about that.

I think once my c-cards are done I would find it hard to get out of the "debt-busting" mindset and would likely try to pay off my mortgage quicker to truly consider myself debt free, but would like to "invest" some of my savings on top of easy-access savings as a diversified portfolio, so to speak.

Sanctioned_Parts_List

Interesting idea for a thread. I was thinking along the same lines, as I've been lucky with overtime for a few months, so am filling my emergency reserve coffers asap.

My debts don't accrue interest and the repayments are not a burden any more so I don't see any big reason to prioritise those over making sure I'm not one missed pay cheque from catastrophe any more.

I can see the logic of having £1000 as a "things go bang" fund and have put that in my plan as second priority (currently I don't own a car, the boiler recently serviced and all that).

I can definitely see the appeal of having 3 months outgoings in cash. I'm aiming for slightly over but not too much more. It's not been a happy time for my industry, so this one's top priority.

After that... well, current accounts and instant access savings don't pay that well, or have crazy rules and limits, and I don't like the idea of having so much cash just inflating away to worthlessness in a normal instant-access account. So I was pondering whether it was actually worth having months 4-6 (or 4-12) at all, or whether it was better to roll anything over into the longer term (higher risk) investments for better potential return, on the basis that in an emergency they could be liquidated before the 3-month pot ran out.

Anyway, in normal times I "save" 20% of my income - 5% goes to the children's savings accounts and I'm not stopping those, 3% is put aside to smooth over January and February (insurance and subs), 12% is currently debt repayment, which this man :money: calls a form of saving (and which will become saving when I'm unsecured-debt-free).

matchboxfull

Thank you. Really interesting replies so far.

I will look at some videos of YNAB. I like the idea of pots and I dislike the idea of interest rates that are so low that money is losing value, but I am not sure about making the move from spreadsheets.

I think my ideal would be a bunch of virtual savings pots linked to a bank account as long as the interest rate was at least greater than inflation. I won't be saving thousands upon thousands (not for a long time anyway) so right now I'm not going to worry too much about interest, especially as it's keeping mortgage payments low!

andyfromotley

The idea of savings losing value due to inflation is a bit of a myth at the moment.

The uk inflation rate is hovering around 0% at the moment.

There are tons of accounts paying 3% with instant access. (santander 3% on the first £20k) Some even offer more. TSB 5% up to £2000. S its easy to make a profit on savings right now.

In fact even if you stuck it under the mattress at the curent inflation rate it would not lose any value, or in fact could gain value given that we are often arounf -0.1% inflation at the moment. (not recommended though!)

strandedinaber

Really interesting thread, thanks for sharing! I also tend to portion it up into separate savings areas. They're all in the same account (an easy-access ISA), but I have actually created separate accounts for them on Clearcheckbook, so the amount of money in the account doesn't matter: it's what's in that particular pot of savings. I have:

- Emergency Fund, intended for if things go horribly wrong with house/car. It's quite low at the moment, due to me borrowing from it for home improvements. From this year, though, I am not touching it at all.
- Events savings for holidays, big birthdays, Christmas. Again, this is relatively low due to Christmas, but being built up every month and my £2 saver challenge is going to this. This pot varies dramatically because I'm able to adapt how much I spend in this category based on my outgoings.
- Utilities savings for car insurance, car MOT, car tax, house insurance etc. I keep this and the events fund separate because although I can shop around for this, the outgoings are less flexible than in the events savings.

quantic

Personally speaking I usually pay all of my bills at the beginning of the month, move money across to a separate account to cover food, fuel and other household/day to day things. Then I leave say £100/150 in my current account for socialising, little treats etc and move everything else to savings. I then don't allow myself to spend anymore than the £150 no matter what. More often than not I usually put some of that £100/150 into savings if there is some left at the end of the month.

I think its a state of mind saving, teaching yourself not to spend until its all gone and altering your priorities. I think its also important to stop caring as much what others think as this can be a huge driver in overspend. People often say to me, do you not fancy a new car - you've had that one a while. I see things like cars now as a vehicle and not a status symbol.

To begin with, I had a little bit of envy occasionally at what others did and bought - knowing I could too if I wasn't so sensible but eventually if you stick with it long enough and when you have plenty of money you set to one side. You weirdly stop being bothered about any of this, or at least I did.

I'm now able to think a lot more objectively. I used to think, should I be having this takeaway and the only decision maker would be can I afford it. Now I think, I can afford it, but do I actually want it, its pretty unhealthy etc.

The process of saving makes you really disciplined in my experience which is very liberating. My origional saving goal was 1 months net salary and now I'm just passing the £25,000 mark.

Playing_with_Fire_2

Re YNAB - if you like using your spreadsheets, you can look at the YNAB videos and set up your own spreadsheet /adjust existing spreadsheet to follow the YNAB theory