Saving Advice

barnstar2077

As Sailtheworld says, pay yourself first.  Or maybe that should be "pay your future self first" :  )

The best way I have found to save/invest my money is to work out a budget first.  Make a simple spreadsheet with your essential outgoings listed on it.  Include everything that is not for your entertainment, like phone, travel and food costs etc.  Once you have your monthly expenses worked out, that becomes your budget.  Periodically go back in and update/adjust your budget.  I have a section on my spreadsheet for bills that I pay by direct debit.  I have added a separate account onto my online banking that all of my direct debits come out of, and I have set up a transfer for the direct debit amount (with a small cushion) from my current account which goes across on the 28th of every month.  This makes it much easier to see what money you have left when you get near to the next pay day.  I then have a set entertainment amount, for buying stuff and eating out etc.  The amount you budget for entertainment should be realistic, and will probably take a few months to get right.  Whatever is left over is how much you can save every month.  So now you know in advance how much you should be able to save.

Now the important bit.  You transfer the amount you can save out of your current account on day one (but don't lock it away in a pension etc just yet.)  You can spend more on any of your budgeted categories, but you have to reduce a different category, other than your savings to pay for it.   For example, you spend £20 more on food one month, no problem, you just spend £20 less on your entertainment that month.  Try your best not to have to transfer any of the amount you saved back in again, but don't stress if you do, it takes time to get it right and you will always be off every now and then, plus saving anything is better than nothing at all.  When you get paid next time, your savings from the previous month become available to put into whatever investment / savings account you deem fit, and you start all over again.  Think of it as a game, and the prize for winning is cold hard cash!!

For me it helps to think about money as time.  So if I see a pair of shoes for £40 and a pair for £100, I ask myself would I be happy if I did three to four hours at work if all I got out of it was the £40 shoes?  Then I think, would I be happy to do a full days work if at the end of the day my manager thanked me and handed me the £100 shoes as my only payment?  If I had a choice would I have preferred the £40 shoes and four hours at the beach with my friends?  This makes most decisions about spending a lot easier.

The real motivation will come when you start to see your savings account increasing.  Satisfaction guaranteed!