If you’re yet to start saving money, don’t worry, you’re certainly not alone. Today, one in five Brits have no savings at all. In tough economic times it can be more difficult to get into a position where you can save money, however, this is all the more reason to save money regularly.
The road to setting up a savings pot starts with a few basic pointers which, if you haven’t done yet, could unlock more money from your monthly paycheque. In this article, we’ll lay out the four key steps to start building your savings from square one, so you can begin thinking about that all important nest egg that’s going to help you down the line.
Step one: clear your costly debts
Before you start saving, you need to prioritise getting rid of the money you already owe – particularly the debts that are costing you the most money. Easier said than done, for sure, but say you have debt on a credit card with a high interest rate, it’s better to act quickly to remove the strain of the additional charges now rather than later.
This can be done via whatever savings you already have or by utilising a lower interest rate personal loan to shift your debt focus from high interest to lower interest creditors. You might not be able to pay all your debts off, but you should be able to break your repayments down into more manageable monthly chunks at the very least.
Just make sure if you do take another loan that you have the means to pay it back on time as per your agreement.
Step two: start tracking your finances
We’ve all read the saving clichés about cutting out the morning Starbucks or whatever other ‘unnecessary’ regular spends you may be making, but the only way you’re really going to know whether you’re spending sensibly or otherwise is to track your finances.
Building a monthly expenses tracker will help you understand your income versus expenditure much better and highlight legitimate opportunities to save money. Having a palpable savings result logged every month will also encourage you to keep going with making the key sacrifices you’ve identified.
Step three: open a savings account
Separating your savings from your everyday account is another useful way to proactively save. When it comes to finding the right savings account to start your new side fund, you’ve got plenty of options to consider, from everyday savers to tax-free cash ISAs.
What’s important is that you find the right account for you. Different savings accounts come with different interest rates and levels of access (for example, higher interest rate savings accounts often come with access restrictions to your money), so make sure you know what you’re getting into before you open your new account.
Once you’ve found the right account, you have a tangible ‘safe space’ to properly put aside the money you want to save for the future.
Step four: set yourself some saving goals
Of course, there’s no point having a shiny new savings account if you’re not sure what you want to do with it. The culmination of your expense tracking should be to create savings goals from it. Once you know how much you can save per month, you can then decide how much you want to. You can also set yourself spend limits in different areas of life (groceries, utilities, social life and so on) in order to help you save your target amount.
The above are all very much savings basics, but ones that can make a huge difference to your financial behaviours if you haven’t acted on them before. Sometimes something as simple as a few bullet point goals on a piece of paper can help you focus your spending and saving better, and with economic times undoubtedly grim at the moment, there’s never been a better time to see if you can start building a savings pot.