How to get your finances in order through a savings plan
If your current financial situation is far from perfect, it might be time to start a savings plan. There are many reasons why you might want to save. A financial nest egg can be useful when unexpected bills arise, such as car repairs and you need access to funds quickly. Some people use their savings to pay for special occasions, such as birthdays and Christmas, or holidays. Savings can be a good alternative to taking out credit and although it can be difficult to do this, it can help you stick to a tight budget.
If you are considering saving some of your cash, there are some considerations you must make first. It is important to pay off any outstanding debts, before you start saving and in particular, priority debts such as rent and electricity. You should also look at your budget and what you have left over each month to put into your savings pot. There are likely to be some ways you can cut back on your spending, so you have extra cash for your savings. For example, you may be able to walk to work instead of taking public transport or prepare your lunch, instead of buying it. A good way to think about it is non-essential items versus essential items. If you need to purchase something, such as your weekly food shop, then of course, this is essential and you can’t go without. However, there are bound to be times when you are spending money frivolously on items you really don’t need. Even small amounts can be used to improve your savings.
Set up a direct debit
The best way to ensure you stick to a savings plan is to set up a direct debit each month and make sure you can’t access it quickly. It can be too tempting to keep moving your savings into your current account, if you can view it every time you log into your account. If the money comes out and you can’t get quick access to it, you are less likely to go to the hassle of moving it into your account, which means your savings will grow. Don’t worry if you can’t afford to save much; every little helps and you can always increase your savings if your financial situation improves. If you can even afford to save £10 a month, it is better than nothing!
Long term versus short term
There are two types of savings; long and short term. Short term savings are those which are usually for a specific occasion, such as a wedding or birthday, while long term savings might be a nest egg for retirement. If you are saving for short term reasons, you should make sure you choose an account which allows you access to your funds within the set time you need it. However, if your plan is to save for the long term, it is more beneficial to choose an account which doesn’t allow access for 5-10 years or more. There are all sorts of options when it comes to savings accounts, so just choose one which is best suited to your needs. It is always best to go for the accounts with the highest interest rates, as you will get more out of your money when you do this.
Improving your savings
When you start saving, it can become quite addictive and can make you much smarter with your spending. If you want to start increasing the amount you are saving each month, start setting yourself goals for how much you are looking to save. It may be that you are quite happy to save only £10 a month, but this might gradually increase to £50 per month. If you set goals, you will have a target to focus on and this will make you better with your savings. A clear budget is also essential for improving your savings and looking at different ways to cut your spending. It is also important to shop around with your savings account, so you get the best possible deal based on the amount you save. You want to maximise your savings and comparing accounts is the best way to do this. There are always ways to improve your savings, you just need to be smart with your spending!