When it comes to saving, most people say they don’t have enough money. “I pay my rent, my bills, do shopping, have some fun and in the end there’s nothing left to put aside”. People seem to think that they ought to save surplus of their money. And that’s wrong.
You see, for most of us saving money comes last. Before you even think about it, there’s not much left on your bank account and you find yourself waiting for payday. It’s easy to spend money when you think you have them for spending. What you should consider, though, is that with that attitude it’s very difficult to put your future goals first.
When you think about it, it comes down to being selfish. But there are two ways of being selfish. One of them stands in your way and doesn’t allow you to grow your wealth. Let’s call it “I want it now” selfishness. Best described as impulse driven, indulging, based on treating yourself and laziness. All those situations when you couldn’t say no to your impulses: to buy, to drink, to eat – they happen to be wrong kind of selfishness. Why? They’re very rarely thought through, planned and good for wallet. When you add them up, they devour a considerable percentage of income. You most likely make these decisions on the assumption that you have money and you deserve to spend them. You’re hungry, so you deserve this £20 steak. Who cares if at home you can make yourself a delicious steak for a fiver?
Well, you should care, if you want to get ahead and achieve something. What’s the other kind of selfishness? It’s putting yourself first – but smarter, future you. Trust me, you can feel much better in three years. Having savings creates a sense of security, that living day by day simply cannot.
So, unless you like living on the edge of bankruptcy, or having those few special days with no money at all just before payday, you really should try these four simple steps and see where they can get you.
- Create a goal, say, £10000
- Calculate your essential costs: rent, utilities, groceries, phone, bus card, fuel etc. How much is left of your income after that? How big chunk of what’s left can you put aside? And finally, if you do put that much aside, how long would it take you to reach your goal? Write it down.
- Set up savings account, preferably but not necessarily in other bank, so you can’t see your savings as available money.
(It’s also a good idea to set up two accounts – one for savings, one for rent and bills money. This way you can only access money really available to you. You can’t spend more. Also, it protects you from thieves – they cannot empty your bank account by stealing your debit card, because most of essential money is elsewhere.) - Every month after payday transfer rent and bills amount to other account. From what’s left, leave a little on your current account, so you don’t feel completely poor, but transfer most of it to your savings account and forget about it. (You’re allowed to check savings account every now and again to see your pile growing. It’ll make you proud of yourself and motivated.)
Let’s do some example. Let’s say you earn £1200 after tax. Some will say you cannot save anything with this wage. Let’s see. Your goal is £10000. Your costs total £773: £500 – rent, £30 – electricity, £30 – gas, £20 Internet, £63 four weeks bus card, £100 council tax, £30 – mobile phone contract. If you don’t buy crazy expensive food, you should be able to survive with £150 worth of groceries a month.
Now, this means you have to transfer to your “essential money” account 923 pounds. You cannot touch this money if you want to pay your bills and not die of starvation. You’re left with 277 quid. If you saved this much every month, you could get to ten thousand in three years and one month (roughly). But let’s say you save only £200 a month and leave £77 for your coffee in town, takeaway sometimes, little stuff. Now to get to ten thousand you need four years and two months.
Of course, you might have different expenditures: cigarettes, fuel, gym etc. There are different council taxes, rents, gas and electricity bills. The point is: you won’t save anything until you set aside some money after payday. The other point is: if you earn more, save more. Secure your essentials, pay your future self, and then you’ll see how much you got left. That’s very important first step, because it can show you where you are financially in comparison to where you want to be. From there you can tweak almost everything – find cheaper place or a flatmate, change eating habits, quit smoking, choose cheaper phone contract, walk instead of going by bus – options are unlimited. But until you figure out your goal and start your way towards it, you’ll never know what other means could get you closer to it.
Write in the comments below if you have your own savings account. Also, you might have your own ideas about saving money, which are worth sharing? Please do so, let other people take advantage of them.
image credit: https://www.flickr.com/photos/59937401@N07/
