Please tell me how much I should save every month?

NoveltySlippers

Hello there - this is my first ever post on this forum so I hope I’ve found the right board.

To cut a very long story short I am trapped in a job that doesn’t make me very happy and have spent my annual leave this week looking for jobs. There is nothing!

Feeling helpless, I thought maybe if I focussed on saving as much of my salary as possible it would make me feel like I was doing something and at least would have something to show for after slogging my guts out on the hamster wheel that is my job. Pre lockdown I used to fritter my income on coffees and eating out and things to help me ‘feel better’ to cope with the job. I’ve realised (like many) how much money I used to waste and also realised a better coping mechanism would be save my earnings until I can find a way out.

Very briefly, I earn £43.5k a year before tax (after pension and other contributions removed it’s about £2.5k a month).

My half of the mortgage is £330 approx. I’m in my early 40s. We don’t have kids sadly, and I don’t drive.

I know I should be able to save way more than I do, and this realisation is just hitting me. (Like many, am also worrying about redundancy in times of uncertainty, so this is another no brainier reason for saving seriously).

With this basic info, how much do you think I should be saving a month, either in absolute figures, or as a percentage of my salary?

Only other info (probably not relevant but just for context) - I couldn’t afford to buy a house till my late 30s, we paid for the deposit ourselves, small deposit so not much equity yet. Was in my mid 30s before I even paid off my student loans, and only mid 30s when I started my pension. So - not a great position compared with many I expect (though I should count my blessings re. at least having a house finally and a job, I know).

Any advice gratefully received.

theoretica

The less you need to live on the more freedom you have.  If you can save half your salary after a year of savings you will have enough to live on for a year out of the workplace.  Or you could look at lower paid or part time jobs.  If you save more than half you have even more freedom from the need to earn money. 

NoveltySlippers

I should add I don’t have a specific savings target in mind, other than I have hardly any savings now (about £2k currently). It’s really just to build them up (high time, given my age) and to also make me feel less helpless with regards my future and being stuck in a job that is making me depressed. I guess it would also make me feel like I was taking some control of my life. So - I just wondered what MSE forum people might think was a sensible amount to save in my circumstances. 

JGB1955

Start with saving one third of your salary, one third for housing/utilities and the other third for food/leisure. These are made up figures but . You have to start somewhere!

NoveltySlippers

theoretica said:

The less you need to live on the more freedom you have.  If you can save half your salary after a year of savings you will have enough to live on for a year out of the workplace.  Or you could look at lower paid or part time jobs.  If you save more than half you have even more freedom from the need to earn money. 

Thanks Theoretica that is good food for thought. 50% of my salary (or more) sounds daunting (and completely not what I have ever done before). But I realise with no kids and major other outgoings it should be possible. I don’t know why this has never occurred to me before! I used to earn half this amount and survive.....I guess as it crept up (very slowly) I just spent more. It sounds so stupid now, writing that down. But I did spend recent years saving for the deposit, I guess, and then spent a bit on the house. Now that’s out of the way, I should start again.

NoveltySlippers

JGB1955 said:

Start with saving one third of your salary, one third for housing/utilities and the other third for food/leisure. These are made up figures but . You have to start somewhere!

Yes, a third definitely sounds do-able (just reaching for a calculator to figure out what a third is). The thought of saving 50% has got me really thinking though. 

I wonder what the average is that people on similar incomes save? (I realise that with no kids we are ‘lucky’ in that sense of being able to save more, though we definitely don’t feel ‘lucky‘ not having them, if that makes sense!).

RobM99

How much should you save? Hmmm... how much do you spend on 'luxury' may be a better question.  Saving is great if you have a specific spend in mind. Holiday, car, guitar (I would). Something to look forward to.
Maybe over-pay mortgage and clear any debts.   I know what you mean about spending on coffee out.  I was doing about £30 a week on casual café visits before lockdown! A coffee here, a sausage roll there... I now have a post-Covid (Yes, I know)  spreadsheet that shows me where my money goes.  £20 a WEEK on roaming data!  Now less than £3.   

Just my view.

barnstar2077

Don't beat yourself up about it.  You are working and have the opportunity to change your ways.  You are in a great position to be able to retire early if you want to.  As suggested above, aim to save a third of your salary to begin with and go from there.  Stuff you wasted money on before doesn't look half as inviting when you realise how much longer you would have to work to pay for it.  I posted the below on another thread earlier:

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!

Cam93

Total up your monthly bills and fixed outgoings,
Add 50-100£ per week to allow small luxurys through the month - you still want a life at the end of the day!

Add the two figures above together, save the rest.

If you don't think you can trust yourself to not spend once you've built up a nice little pot, think about locking it away in a ISA or similar, gain intrest, repeat the process and hopfully see your money grow.

The good part is you don't have any debt and ot doesn't sound like you've got any real big expenses.

4 years ago when I brought my first house at age 22 I worked every hour under the sun, gave myself 10% of my wages to splurge abd the rest went on saving for the house. I'm not quite as fruigle but I save BEFORE I spend and regiment myself by saving X per month minimum and then any left overa go into a separate pot also 

NoveltySlippers

RobM99 said:

How much should you save? Hmmm... how much do you spend on 'luxury' may be a better question.  Saving is great if you have a specific spend in mind. Holiday, car, guitar (I would). Something to look forward to.
Maybe over-pay mortgage and clear any debts.   I know what you mean about spending on coffee out.  I was doing about £30 a week on casual café visits before lockdown! A coffee here, a sausage roll there... I now have a post-Covid (Yes, I know)  spreadsheet that shows me where my money goes.  £20 a WEEK on roaming data!  Now less than £3.   

Just my view.

Oh my goodness - yes! I haven’t worked out how much I used to spend on roaming data, but since staying at home and using only WiFi I realised it must’ve been a lot!

I am ashamed to say I think I easily spent a LOT on Costa-type breakfasts, lunches from Tesco.... (I should rethink it as ‘Costa-lot’ when I go back to the office.)

NoveltySlippers

barnstar2077 said:

Don't beat yourself up about it.  You are working and have the opportunity to change your ways.  You are in a great position to be able to retire early if you want to.  As suggested above, aim to save a third of your salary to begin with and go from there.  Stuff you wasted money on before doesn't look half as inviting when you realise how much longer you would have to work to pay for it.  I posted the below on another thread earlier:

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!

Thank you Barnstarr I actually just finished reading that message on that other thread!

You’ve raised a really interesting point though. Do you REALLY think someone like me could retire early? 

At the moment, I’m only set to pay my mortgage off when I’m 68. I always thought early retirement was completely out of reach for someone like me (pension also only started in my mid 30s).