How Much do you Save?

Bravepants

economic wrote: »

ive averaged 80% saving on net pay. i was earning 100k or so last ten years and i spend very little. now i am retired and i am 34.

Now THAT'S the way to do it!

Well done you!

Reckless_Saving

I average a 60% savings rate, first 10 years of my working life it was <10% due to a very low wage but during that period I learnt a lot about forward budgeting and losing the auto-consumer nature of spending, lessons I continue today.

ian-d

EachPenny wrote: »

If it looks reckless then maybe you've looked it up in the wrong place?

Bank gives you £X for Y months at 0%. You put the money in a savings account earning Z%. Coming up to Y months later you give the bank their £X back, and keep the interest earned for yourself. What's reckless about that?

Might be wrong, but it looks to me that you borrow money from an institution (a debt), to make a small amount of interest on it before paying back the original amount. Not my style, but sure it works for some.

Anyway, I've taken it off-topic, so apologies to the OP.

kauto

I save around £800 a month :money:

bowlhead99

ian-d wrote: »

Might be wrong, but it looks to me that you borrow money from an institution (a debt), to make a small amount of interest on it before paying back the original amount. Not my style, but sure it works for some.

Making money by obtaining money at low cost and giving it to someone else who pays you more that that low cost, is a way many financial services businesses make money.

Obviously it gets riskier if you are using "investments" rather than guaranteed returns of savings accounts, or if there is a risk of the debt being called in before you can get your hands on cash to pay it off.

Anyway, I've taken it off-topic, so apologies to the OP.

These threads always go off topic because there will be such a range of answers to the question.

Depending on someone's financial circumstances, the answer to "how much do you save" might be "As much as I possibly can" or "As little as I can get away with and still meet my future needs". Both can be completely legitimate sensible answers.

Then in terms of the amount, whether you call it in percentage terms (10% of gross salary? 10% of take home?) or an absolute amount of pounds (£100 a month? £2000 a month?), the right number for one person is not going to be the right number for another.

I could say I saved and invested £30k a year, but what value is that to anyone else? Some people don't earn that much. Some people are paying down equity on a house and spending money on kids' education while others are saving more to perhaps do those things in the future. Some people are saving to buy a car, others already have one. Some people are with a partner and have two incomes with which to pay rent/ mortgage / bills resulting in a massive surplus of cash, while other households have one income and chose to have a larger house or in a more expensive part of the country, and kids and pets etc.

Cotta wrote:

I'm always interested in how much people save and if there is indeed a specific amount? Do people set X amount aside each month or is it a case of setting aside what you can afford after everything else has been paid for?

If you only save "what's left" after looking at what money is available after buying all the things you want, at some point you may realise too late that you have spent too much money compared to how much you've earned and how much you needed to put aside for the lifestyle you want.

Perhaps a better plan is to say each payday that instead of immediately paying your bills and buying all the things you want to buy and seeing what's left for savings, you should first "pay your future self" by putting money into savings and investments by direct debit and then paying your bills and then seeing what's left for discretionary spending. People who do it that way around tend to have a more reliable rate of savings which stands them in good stead for their future goals.

If you extend the logic you can save into (and draw money out from) various different accounts for different purposes to help manage the overall budget. For example the holiday budget gets £150pm by standing order, the clothes budget gets £125pm, the car budget gets £200pm etc etc. When you buy a new pair of shoes or a suit, you pull money out of the clothes account to cover it, and when you come back from your long weekend in Paris you pay your credit card off with money from the holidays account.

You will never actually spend exactly £150pm on holidays in a specific month and you will never actually spend £200pm on your car because you might spend £700 for insurance or £500 for tax or £300 for a service or £150 for a tyre or £0 in a normal month or £5000 when you are changing the car in five years time. However, it is much easier to keep an uncluttered mind if you're loading the car account with a fixed amount of money at the start of every month, instead of (for example) needing to pay for your car insurance renewal in June and then not being able​ to afford to do any savings or make a pension investment that month.

EachPenny

ian-d wrote: »

Not my style, but sure it works for some.

There's a world of difference between 'style' and 'reckless' though.

If you walked down an empty street and spotted a £5 note on the ground would you pick it up? Some people wouldn't because they think picking up money in the street is beneath their station in life. That's a style choice.

Banks are waving £5 notes around which can be 'picked up' in exchange for filling in an application form (often online) and remembering to pay them some money back a year or two later. No difference to picking up the £5 note in the street, except that with stoozing you are legally entitled to keep the money.

Cotta

EachPenny wrote: »

There's a world of difference between 'style' and 'reckless' though.

If you walked down an empty street and spotted a £5 note on the ground would you pick it up? Some people wouldn't because they think picking up money in the street is beneath their station in life. That's a style choice.

Banks are waving £5 notes around which can be 'picked up' in exchange for filling in an application form (often online) and remembering to pay them some money back a year or two later. No difference to picking up the £5 note in the street, except that with stoozing you are legally entitled to keep the money.

However does borrowing £8k for example from AA and putting this into a high interest account not damage credit ratings?

Marine_life

I think you need to be careful not to focus on saving but to focus more on increasing income. It sounds obvious but at relatively modest levels of income its easy to let expenditure expand to what comes is. The trick is then to hold that spending as income increases and spin off the rest.

Second point - after you have a decent emergecy fund - don't put any money into deposit accounts. Split between a nice range of diversified tracker funds and P2P and your savings will start to appreciate (assuming you can live with some ups and downs). You need to get compounding to work for you if you want to build up a decent pot.

Reaper

Bravepants wrote: »

Typically you see when your retire with a company pension the pension pays about two thirds of your working salary

Once upon a time when defined benefit pensions were the norm this was true, but not any more. Hardly anybody will achieve this and most people are sleep walking to poverty in retirement thinking they have it covered.

I suggest playing with a pensions calculator such as this one and see how much you need to save. You may be shocked. Particularly if you want your income after retirement to keep up with inflation.
A simple calculator
A more comprehensive one

EachPenny

Cotta wrote: »

However does borrowing £8k for example from AA and putting this into a high interest account not damage credit ratings?

That question probably needs it's own thread on a different board

But in simple terms, if you aren't planning on applying for a mortgage in the near future then what is the point of having a good credit history if you aren't going to make some use of it? Lenders are primarily interested in ability and reliability when it comes to repayments. If you have no consumer debt you have very little history for the lenders to look at and base their decisions on.

Borrowing a small amount on a credit card (by balance transfer or spending, not cash withdrawals) and then paying the amount down by regular monthly payments, always made on time, demonstrates responsibility when it comes to borrowing and repaying debt. In most cases this will enhance, not damage your 'credit rating'.

In my case I hadn't taken out a loan or credit card for many years. I had a satisfactory level of savings and investments. When I signed up for my free credit report I was shocked to see how low my 'score' was compared to the averages, especially when it came to the average for the area in which I live. Since I started stoozing my 'score' has gone up, it jumped significantly just after being offered and accepting a new credit card with a £4.5k limit - nearly twice the amount of my total credit elsewhere - which normal logic would say doesn't make sense. However, you have to remember the largely meaningless score and ratings work to a different logic than the average consumer would assume. Hence small amounts of credit, repaid regularly and in full are likely to be a positive benefit to your overall financial situation. It seems to make applying for new accounts much easier, and one day if you need to take out a loan (not mortgage) you may find a nice tidy credit history to be essential.