5 habits of a successful Saver
“We should remember that good fortune often happens when opportunity meets with preparation.” - Thomas A. Edilson
The road to achieving something in life is never easy; however, with persistence and hard work, most aspirations can be achieved, including being a successful saver. The UK’s relationship with saving improved during the lockdowns but then retook a turn for the worse when the cost-of-living crisis worsened, and prices skyrocketed. Currently, the inflation rate is 11.1% which is a 40-year high and is 11.1%. However, the Bank of England anticipates that the inflation rate will decrease drastically in mid-2023. The BoE has this perspective because of the monthly cap on energy bills for both households and businesses that the government introduced, which means that the energy cost will not increase as quickly as it has.
Another reason they expect inflation to fall is that the cost of imported supplies will not increase as rapidly because some of the challenges businesses have faced have begun to ease. The final reason is that they expect a reduced need for goods and services in the UK, which would mean that the cost of many things would not increase as fast as they have.
However, regardless of the current financial situation, it is crucial to be able to save what you can because if you lose a vital source of income or your income can not keep up with the speed of inflation, you will have savings to turn to in cases of emergencies as some salaries are failing to keep up with inflation rates.
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Set up a budget
The first step in managing your finances is a budget; although it can be a little time-consuming, it is a worthwhile investment of your time to get a better picture of your finances.
Setting up a budget can decrease the likelihood of ending up in debt and increase the chances of being more prepared for unexpected expenses, improving the probability of a good credit score and being approved for a mortgage or loan. You will also be able to see where you can save money and be more likely to save for holidays and a mortgage on a home.
What will be needed?
Before starting a budget plan, you will need to calculate the amount you spend on household bills, other living costs, financial products such as insurance, bank charges or interest, and any money spent on family and friends such as lending money or purchase of gifts or travelling to events such as hen trips, forms of transport such as car expenses such as fuel tests, leisure, including gym membership, hobbies, cinema and other entertainment. The current financial climate where the cost of living is causing many people to be at their wit’s end.
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Set money aside for savings
Once you have set up your budget, make room for saving by setting up automatic direct transfers from your current account to your savings account every month. Even if you would like to save for a specific goal, it is still worth having an emergency saving pot, especially in the current financial climate where the cost of living is causing many people to be at their wit’s end.
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Saving Strategy
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Trust your gut feeling when it comes to investments
Sometimes the gut feeling you have can tell you things that may help you avoid getting into a financial conundrum; for instance, if you want to make a risky investment but something is holding you back, that may be your gut telling you that it is not the right time to invest or not the correct type of investment for you to devote some of your money.
If you are thinking of ignoring your gut feeling, research the investment you would be investing in, such as the credibility of the investment, success rate, other people’s experiences, and whether their business is registered and still active. And think about how you heard about this investment. Is it from a reliable source?
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Trust your gut feeling when it comes to avoiding taking out extra debt
If you are thinking of taking out a mortgage or accumulating another type of debt, but you get a bad feeling, this could be your intuition telling you not to add to your debt load at this time.
However, if you’re still in doubt about what to do, look at your finances, such as a budget or financial plan that will give you a clearer picture of your finances and whether you have room to add another debt.
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Trust your intuition when it comes to joint saving accounts or other forms of saving
If you are considering embarking on a joint venture such as a joint saving account or joint mortgage, it is a good idea to weigh the advantages and disadvantages before taking the plunge because if your partner falls through with payments, you will also be held accountable as your name would be part of this financial agreement. Even if you split up or divorce, it remains your responsibility to hold the fort if your partner does not keep up with payments and vice versa. Therefore, if you get a knot in your stomach from taking such a risk, then avoiding this sort of joint venture is best.
Or if you are thinking of helping out a friend or family by becoming a co-signer, it is crucial to consider the risks as this is a risky responsibility to account for if the borrower cannot make the repayments on loan such as a mortgage, as you may have to step in and make the payments yourself.
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Be in control - of your spending and don't fantasise about your budget
Make sure you have a budget plan in place so that you do not dream of a budget that may not reflect your actual finances.
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Build your emergency fund through a low-spend week or month
Build up your emergency fund by doing a low-spend week or month; spending a minimum amount means spending only on essentials which does not include takeaways, coffees, or drinks with friends. A month like January, when people usually feel the financial blues after Christmas and are not as likely to go out, is a good month to pick.
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Avoid splurging out on significant expenses or lots of little expenses
The temptation to overspend is something that remains even during unstable economic times; it can be tempting to spend on things that are not needed, especially if feeling stressed. But it is crucial to shift the focus elsewhere to other healthier habits, such as learning budget-friendly recipes or learning a new skill for free on YouTube.
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Research - best options to save on
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Read articles on reputable sources such as Intellisaving
Conduct your research by reading articles on saving and budgeting; for instance, Intellisaving has several articles covering these areas, such as ‘How to manage a household on a budget?’ and ‘Is saving really outdated’.
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Research on Google
There are many reputable websites with tips and information on finance areas.
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Check the government site for schemes or discounts
Check the government site for what you may be eligible for in the form of schemes or discounts to see if you could have extra money coming in. If you are eligible for a scheme set up by the government, you can use the extra money towards your savings.
For instance, the government has schemes such as giving workers on low salaries who receive universal credit or working tax credit a savings bonus. They pay a 50% bonus over what is saved, up to a threshold of £1,200 over four years. If you are unemployed, redundant, or not working because of illness or on a low salary, which includes being self-employed, you could qualify for the help to save scheme.
The government also chips in for Lifetime ISA (LISA) is available to anyone aged between 18 and 39; a maximum of £4,000 a year can be saved into this account, either through a lump sum or deposit in cash. The government pays a 25% dividend in addition to what you pay. For instance, if you save £1,000, this will add up to £1,250, or if you save the entire £4,000 amount, you will have £5,000.
If you are a first-time buyer, you may use the money and bonus towards a deposit for any residential property amounting to a maximum of £45,000 once the LISA reaches 12 months. This type of account has dual use as it can be used for retirement though it is essential to be wary as saving into a pension has more chance of being more profitable.
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Revise - saving strategy from time to time
A saving strategy should be revised from time to time as a saving method that worked well in the past may not be the best saving strategy to continue using in the future.
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Save first, spend later
The save first, spend later strategy is often recommended as you pay yourself first through manual or automatic transfers from your current account to your saving account, which usually increases the chances of saving as whatever is left over after saving is then used towards essentials and other expenses.
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Common budgeting rule when wanting to save
A common budgeting rule often recommended is the 50/30/20 rule; this method may be efficient for some people who want to save.
50% of your income should be your most needed expenses, such as household bills/mortgage payments/childcare and other unavoidable and regular expenses.
30% for wants, such as clothes and holidays or any other desirable expense you have.
20% for savings. This technique may be widely known but may not be the most efficient for everyone. So, you need to evaluate your personal circumstances and devise the best budgeting strategy, and as mentioned before, it is always good to have a realistic budgeting strategy than a fantasy one.
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Multiple account budget
You can also budget for saving by setting up multiple bank accounts; this is easier to do with online banks and assigning them tasks that share similarities with the 50/30/20 rule. One account can be for essentials such as housing costs, another for savings and another for things you want to buy or do. By setting up regular transfers from the main current account to other accounts, you will be able to save and budget without having to stress the process too much.
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The journey to being a successful saver may not be straightforward as it can seem daunting for several reasons such as not knowing how to start saving or finding it difficult to be consistent with saving but know that you are not alone. Everyone had to start from somewhere to get to a point where they became a successful saver.
Furthermore, once the act of saving is grasped, it becomes a worthwhile investment of time and money. This is because savings have helped many people get through difficult times and helped them reach their most dear aspirations.
Moreover, as mentioned earlier, plenty of information is available from reliable sources such as Intellisaving, which is jam-packed with helpful information and recommendations. Intellisaving has an article for all sorts of circumstances, from articles for single parents to those entering retirement.