Please tell me how much I should save every month?

NoveltySlippers

Sorry - I don’t know how to quote only a segment of people’s posts!

NoveltySlippers

Cam93 said:

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 

Wow. This is amazing. How different my life would be if I did this at your age! I was completely clueless about money at your age.

Emmia

So one of the things I've been doing is using some of the newer banking apps to help me boost my savings - currently using Chip which does an autosave and Moneybox stocks and shares ISA. This is in addition to a regular deposits into an instant access savings account, premium bonds, and a HSBC regular saver. 

Chip essentially connects to your bank account, and through some smart wizardry works out week to week an amount you can save without feeling it (i think it does a save every 4 days) it offers the option of "savings  pots" and will divide your "save" into these according to the percentages you set. The app also tells you when and how much it will save - giving you the option to modify or cancel it (you can also set minimum bank balances, and whether you are ok with the app saving when you're in overdraft). There are also saving levels from 1 - 5 (which you choose and can modify week to week) which take out different amounts of cash - level 1 might take out £5 but level 5 £50.

 Since last November I've saved about £2k via this app. Unfortunately this money is interest free, but it is easy to use Chip as the saving tool to build up a few hundred quid and then transfer these dollops of cash into a savings account. They're also starting to offer interest bearing accounts at 0.9% - and I have one, but these currently don't take transfers from the autosave, and I don't think these accounts are available to everyone yet. Money saved with Chip also gets transferred back to your account quickly in the event you need it.

Seperately I have a Moneybox S&S isa which I deposit into weekly and offers roundups of my transactions - I've been doing this for a couple of years, and have saved about £3.5k via this app

My key tips are to do regular savings immediately after payday - even £100 will build up nicely over a year or two and to use a different provider from your main bank account so you cannot immediately see the savings pot when you open your normal banking app. 

RobM99

Can I retire at xxx age?   Well, if ever there was a question whose answer starts with "It depends"!
I was made redundant at 57, with a decent pension (OK £1300 a month after tax). I own my home outright. Can I survive? Oh yes.  While I'm not rolling around in cash, I don't worry about bills. I still manage a week on the Med each year, I'd do more but I have other things to keep me from doing so, my choice.

theoretica

NoveltySlippers said:

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). 

Absolutely!  Or you could do something other than work full time followed by full retirement.

Inflation should help pay off the mortgage before you are 68.

barnstar2077

NoveltySlippers said:

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). 

Your take home is 2.5k a month.  You say your half of the mortgage is only £330, which implies that your partner is working and contributing to bills too.  So I am assuming that your half of the bills are well under a grand.  Which leaves you one and half or more to play with.  That is a lot of money as a percentage of your salary.  As Theoretica says, if you were to save half of your salary a month, that is one month earlier that you can retire.  In reality though it is probably better than that, because if you invested the money for the long term you should also get a return on that money, and any money that you put into a pension would also get an automatic 25% uplift (all be it with restrictions.)  Of course you still need to have a bit of fun now, so make sure you still have a realistic entertainment budget.  I too used to buy a lot of stuff, stuff that would take my mind off of things for a while, but ultimately used to leave me feeling even more depressed (because my situation hadn't changed and I would regret wasting the money later.)  Now I try not to buy things just to cheer me up and instead spend most of my entertainment money socially, like meeting a friend at a cafe for a cuppa before we go for a walk.  This is helping my wallet and my health at the same time, by forming more social connections and improving my physical and mental  health.  All of which has the benefit of making it much more likely that you will enjoy a long happy retirement when you get there!

Time to start thinking about how you want to use your money going forward.  You could do a lot worse than a three way split between a pension, mortgage over payments and an S&S ISA (in case you want to retire earlier, or go part time to reduce your days before your pensions are available to you.)  Although, as interest rates are so low you could also just add more to your pension and a stocks and shares ISA instead.  Just throwing ideas out there.

Add to your 2k savings first though to make an emergency fund.  Ideally six months of money to cover the bills if you were out of work (You won't need much more than the minimum expenses as you are hardly likely to be going out on the town every night if you just lost your job after all.)

The next time you are feeling a bit down at work remember that you are in a great position and have many options for how to build a better future!  Trust me, once you have a plan in place you will feel a lot better about being at work.  Like a prisoner who is able to smile at the guards because they know they are secretly digging a tunnel! :  )

I'm not saying that all of this is perfect for you, I don't know you well enough, but I wish you well and hope it will give you some ideas.

Alistair31

What do you do for work that is making you feel as you do? 

steampowered

As you started your pension in your mid thirties, you should really be paying 15-20% of your salary into your pension (including employer contributions you might receive).

If you are much below that I think a pension should be your priority - more of a priority than paying off the mortgage. A decent pension will give you a lot more flexibility to either retire earlier or have a good standard of living in retirement.

Pensions are a much more efficient way of saving for retirement than cash savings or overpaying the mortgage, because:
- You get tax relief - so effectively an instant 20% boost for basic rate taxpayers.
- You get investment returns - pensions are stock and share based investments which typically return about 6-7% per year on average over the long term.

That said, I think you also need to use some of your money to enjoy your life. Life is too short to be miserable! Do make your money go as far as possible, but spending some money on things you enjoy - whether that's a holiday, or a nice meal out, or a hobby - is worth it.

NoveltySlippers

Emmia said:

So one of the things I've been doing is using some of the newer banking apps to help me boost my savings - currently using Chip which does an autosave and Moneybox stocks and shares ISA. This is in addition to a regular deposits into an instant access savings account, premium bonds, and a HSBC regular saver. 

Thank you - I had no idea these types of apps existed and they sound very helpful. I’ll look into them!

NoveltySlippers

barnstar2077 said:

The next time you are feeling a bit down at work remember that you are in a great position and have many options for how to build a better future!  Trust me, once you have a plan in place you will feel a lot better about being at work.  Like a prisoner who is able to smile at the guards because they know they are secretly digging a tunnel! :  )

So much useful stuff here to think about, and this made me laugh! I’m going to be visualising this EVERY DAY from now on 😊.

I really like the idea of just spending on nice ‘experiences’ (and friendships) and not ‘stuff’. Great advice.