Saving is just like budgeting, it basically involves a little planning and a good degree of self-discipline. Many people fall down when it comes to saving, simply because they cannot wait to save the money for something they want to buy. This is unfortunately a trait common to people living in the developed nations in the 21st century and the ‘have now, pay later’ culture has played a big part in the record levels of consumer debt that we are all too familiar with.
However, it wasn’t too long ago that credit cards and easy access to finance didn’t exist yet our parents and their parents were still able to buy luxuries or enjoy the odd ‘treat’ now and then simply because they knew how to save and were disciplined about it. And now, it is still possible to save, it just takes the same discipline and a well organised approach.
Budgeting is the Starting Point
Drawing up a budget is the first thing you need to do if you intend saving up some money for something you want and this is discussed in another article where you’ll learn all about how some sacrifices might have to be made in order to free up additional money.
Once you’ve done that, you’ll need to figure out how you’re going to save the additional money as a result of your new budget.
Separate Savings Accounts
To begin with, it’s important to have a specific figure in mind which you are looking to save each month. For some people, it might seem impossible to give a precise figure as your income levels might vary month by month. For example, you may be self-employed or rely on bonuses to make up your wage so your monthly income might fluctuate up or down. However, in these instances, you could still work out a percentage of your total income that month that you can put away as savings.
You should set up a separate savings account. Many people choose to keep all of their money in one single current account. Not only is this more likely to result in you frittering away spare cash planned for saving, it’s nigh on impossible to keep tabs on how much is savings and how much is for bills etc. If you don’t have an ISA, you should look to open one. If not, there are many attractive savings accounts out there. The interest you’ll receive will be higher than with a current account and, if you choose an ISA, it’s tax free too!
Furthermore, in this day and age of internet banking, it’s often a good idea to open your ISA or some other savings account in a different bank from your current account. The reason being that if both your current and savings account are with the same bank, it’s far easier to simply flip some money from your savings account into your current account if you’re finding the latter’s running short. And, many people ‘forget’ to flip the money back over once they’ve straightened their finances out. Yes, it’s true that even if you keep the current and savings account in separate banking institutions, you’re still able to transfer money between them. However, because it takes 3 to 5 days to appear in the other bank account, unlike the instant transfer between accounts in the same bank, you’re less likely to be tempted to do it.
Adopting a Healthy Mindset
It’s often useful to keep reminding yourself of the reasons why you want to save money in the first place. It may be for a new car or holiday but if you have set yourself a ‘goal’ about something you want to buy and you have set a target date by which you want to reach that goal, it will help you further in your saving. Take a company bonus, for example, or maybe some other cash windfall you’ve come into. Your first reaction might be “that’s nice…now what can I spend the money on?” However, you should adopt a mentality whereby you say, “that’s great, I’ll put that into my savings account which means I can get what I’ve really wanted to buy a month sooner than I could have done”.
Ultimately, not only will you appreciate the efforts you’ve put in when you’ve reached your target, you can be safe in the knowledge that you haven’t gone into debt to pay for whatever it is you’ve been saving for. Furthermore, a healthy attitude to saving is bound to have a positive impact upon your all-round budgeting and money management skills meaning you should never have to worry about debt, unlike many thousands of people for whom debt is a burden which can cause constant worry and stress.