Saving tips and advice

MovingForwards

What works for one, may not work for another, you'll need to experiment and see what works for you.

Each Christmas holiday I set up my new annual budget of all fixed and expected costs, tweaking it as things increase / decrease throughout the year.

I treat savings as another bill and pay the bulk of it into my savings accounts each payday.

When my food budget comes under one week, I'll move the surplus to savings.

I have my main current account where wages go in and direct debits come out, also used for food / petrol.

Another CA is for my annual bills eg home / car insurance, breakdown cover, car repairs etc. That only gets used for those. I calculated how much was spent the previous year, add a bit extra on, divide by 12 and top up ¹/12 each month. The surplus will eventually pay for my replacement car. This account pays interest.

My 3rd CA holds the maximum for interest and is only to be used in an emergency at home, eg a water / gas leak.

I've various savings accounts, all are earmarked for specific things eg internal modernisation, another for external repairs, another for ERCs in case I remortgage or sell and move before my term is up, another for broker and legal fees. Another is my mortgage EF in case I lose my job, another is EF for bills should I lose my job.

You get the point with these examples. I'm prepared in case anything happens, planning to do things and not doing them without having the money first.

Jami74

saundyc said:

Jami74 thank you for your advice, you're right, I was living past my means and I really like your idea of treating savings as a priority because it should be, I'm having a few light bulb moments on this thread!

I think it's also a good idea to really think about what savings mean to you. I used to think of savings as money gathered for nice wants and would feel cheated if I had to spend my savings on eg car repairs. Now I don't really have savings as such, instead I budget for things. I put money for car related expenses into a separate account each month and when it comes to paying for repairs I feel good about having budgeted for it, rather than annoyed that I've had to spend my savings on it.

You ask in your original post what sort of things you should save for and how. I'm not saving to pay for my own funeral, I hope the people left behind dispose of my body in the cheapest way possible and hopefully there'll be some money from my estate to pay for this. I didn't save for my children's university/first car etc, I simply could not afford to put money aside when they were young, it didn't make sense to put money into savings when I was in debt elsewhere. I budget for yearly expenses (Christmas, birthdays, car expenses, professional fees, insurances etc), a few emergency funds (phones/laptops/tablets, vets bills, white goods), holiday fund (which is the lowest priority and the first one to get reduced when things are tight), a long term account for house/moving related costs and a ten year S&S ISA. I started by setting up a new account for each individual thing because I found it easier to keep it all separate and I get a few rewards/perks from different accounts. Across my accounts I have a few thousand pounds, but I don't think of these as savings as the money has already been allocated, in my mind it is not money that is available for spending.

EssexHebridean

Personally I'd begin by doing a solid black and white budget and living with that for a few months, transferring ANY surplus to a savings account to begin to build a decent emergency fund. That then negates the need to use credit when something genuinely unexpected happens. The way we work things is to have specific savings "pots" in accounts linked to our current accounts for saving for various things - so we have them for car expenses (everything aside from diesel), holidays, "joint fun" which is travel for trips out, meals eaten out and about, that sort of thing, Household covers not only insurance but also things like a bulk purchase of water filter cartridges, small appliance replacement or needing to buy things like sacks of bird food. Personally I also save for clothing & footwear purchases, for expenses related to a specific  hobby (aviation photography - so that's everything from accommodation to airshow tickets) and for replacement of items like my mobile (which I buy outright only when actually needed, not just because I fancy an upgrade - and run on a SIM only basis). We have automated transfers set up to those accounts each month so the money is saved before we even miss it - this method only works if those savings amounts are solidly in your budget though, otherwise overdraft territory beckons! Others use a single savings account for all these sorts of things but keep documented how much of the balance in there relates to each separate area. 

Once you are confident that your budget includes specific savings for all the areas that need covering for you, then it's time to see what surplus is left, and then make a decision on how to allocate that. You might choose in the first instance to put 50% into another kind of savings - a lot of us here use Premium Bonds because as well as an absolutely "safe" method of saving there is also always the odd chance of winning a prize! The remaining 50% could indeed pay off against a mortgage - ideally the one with the higher interest rate. If the interest rates are the same on both then personally I'd be wanting to get rid of the one that was taken to consolidate debt so would throw any OP's at that. You HAVE to continue to look at that as a secured loan rather than specifically a mortgage IMO - mortgages are traditionally seen as "OK" debt because of the nature of them, but that shouldn't really apply when they've been used to pay off debts IMO as if you just let it run you'll likely end up paying a LOT more interest than you would have done had you just paid off the original debts over time! 

saundyc

That's great advice, thanks so much for your help.