With summer coming to a close, and the kids back at school, your finances may be feeling the pinch after a hectic six weeks of days out, holidays and splurging.
Research has shown that our saving habits are passed down from our parents or caregivers. You may be an avid saver, who gets a deep sense of satisfaction every month when you look at your bank account. Perhaps you’re a habitual spender who ‘lives for today’ and spends little attention on preparing for the future.
Planning for you and your family’s future doesn’t have to be a chore, but will enable you to prepare whilst still living the good life today.
Read on to find out how to create a healthy balance between saving and spending.
1. Set goals and stick to them
Be clear on what you want to achieve in life, make a list, and then stick to it. Allow yourself to achieve things that aren’t purely practical. If you’d like to learn guitar, own a motorcycle, or go travelling to a far-away country, then you have to adjust your spending habits to accommodate these.
Understanding your cash flow will give you the power to make decisions about what you should be spending your money on. Be sure to monitor your spending weekly, as this will take far less time to assess than if you check less frequently. Noticing overspending is easier to rectify if you take action sooner rather than later.
2. Take control of your monthly bills
There are three types of expenditure*:
Past commitments: what you spend, on a monthly basis, to cover regularly occurring expenses like rent or mortgage payments, utilities, gym membership fees, and other commitments such as credit card debt and car payments.
Present Choices: what you typically spend, on weekly basis, to cover your unique set of lifestyle expenses such as gas, groceries, eating out, entertainment, and recreation.
Future Needs and Wants: what you save, on a regular basis, to protect yourself from the unexpected, fund special purchases and events, and achieve your short, intermediate, and long-term financial and life goals.
Making choices on big purchases will increase your Past Commitments, making it harder, or even impossible to save for your Future Needs and Wants. It is important to figure out what you prioritise in your future, and whether a large purchase is comfortably sustainable with your income.
3. Schedule your savings to accommodate your goals
With Online Banking available with all major high street banks and building societies, it has never been easier to schedule regular standing orders into your savings accounts.
Saving for your retirement is easier if you consider money set aside as not available for use. Set up your accounts so that this allocation is put away before you notice it in your current account.
If you find yourself dipping into your savings account for different things, you may benefit from setting up separate accounts for specific goals such as a holiday, or Christmas. This will allow you to see your finances grow as you come closer to achieving your goal.
4. Prioritise your wants and needs
Making clear objectives for your short and long term will make it easier for you to decipher the difference between what you want, and what you need in life.
You may feel that you couldn’t possibly live without your daily take-out coffee, but at around £3 a pop, you’d be saving yourself over £1000 a year, the equivalent of a luxury holiday. Once you realise what is important to you, you can begin to prioritise your saving habits.
5. Stay spontaneous!
Set aside some of your income for spontaneous spending to avoid feeling constrained. Setting aside money on a monthly basis will mean that you can spend when you like, whilst still enabling you to take control of your long term saving goals.
If you’d like to discuss your savings, please give Amanda at Beaumont Financial Planners a call on 01961 670524.