I bang on to everyone all the time about how important saving is, and people usually always respond to me with “but how Laura? I just don’t understand how to save; I just can’t do it” …
At first, I was confused, I thought how do you not know how to save?!
Then I came to the realisation that I never had a special guidebook that taught me how; I didn’t do an online crash course in saving; my parents weren’t financial advisors (or rich for that matter).
Schools don’t teach the important lessons in life like how to handle money, or best ways to save, or all about the difference between savings accounts or credit cards so I taught myself.
And I am still learning, I don’t always get it right but I do think learning how to save money is an invaluable skill in life for so many reasons and it is never too late to start.
When I was 19 and started getting a monthly pay check, I learnt that I got more enjoyment out of saving then spending, (there is pros and cons to this attitude…) and I feel like I have learnt some valuable money-related lessons over the years.
Whether you are just starting out with your saving journey, or have been trying to save for years but just can’t seem to get anywhere with it, then here are my top tips to use a foundation for saving your money:
1. Track your money
I am a bit obsessed with Microsoft Excel (I major geek out over it) so I have always used it to track all my spending, from month to month.
It can seem quite daunting, but it is a useful tool to track what is going on with your money. When you start out, it doesn’t need to be complicated.
Keep the spreadsheet simple – list what money you have going in (wages) vs. what money you have going out (bills).
The money left over from that calculation can be split out: Allocate some to savings, then the rest is your allowance to spend that month.
A budget planner will keep you on top of your finances, and not only help ensure you don’t get into debt but will help you reach you saving goals.
It is a win-win situation!
Seeing where your money is going, keeping a track of your spending habits, and forecasting the money you can afford to save for that month is exciting and refreshing. Also gets rid of a lot of bedtime nightmares about financial stress!
If you want to make your own budget planner, I will be writing a blog (tutorial) soon on how to make your own budget planner (so keep an eye for it!).
Or if you don’t have access to a laptop, or just don’t like using Excel, then you can work the calculation out and write it down in a notebook.
Top tip – We are very lucky that we now have apps, such as Monzo and Cleo that help track your money so if you like the work to be done for you, these apps will categorise your spending habits for you
2. Always put money in savings at the start of the month, not the end of the month
Many people think that ‘saving whatever is left over’ at the end of the month is a good way to save but let me tell you, if you have that money sat in your account, the chances are, you will spend it (even if by accident).
Usually there is nothing left in there at the end of the month to save. And that means another month goes by with your savings not increasing…
Here is what happens when your money doesn’t get moved from your current account and into a savings account: every time you check your bank account, your brain is more likely to think you have all that money to spend how you wish.
If however you put it into a separate account at the start of the month, then you don’t need to worry about spending that money!
The key is to see the money that goes into savings as a ‘bill’ or as a non-negotiable outgoing.
When you are tracking your money for the month, after you have worked out all your bills and what is left over, you should then next allocate money for savings and put it in there straight away (as per the previous bullet point) like you are paying a bill. Then make sure you only spend what is left over after bills AND savings has been accounted for.
Top tip – if you are worried you will keep dipping into your savings account, open up an ISA with a different bank or company, so that it is harder to make a transfer from your savings account to your current account. Or put it into a locked ISA.
3. Change your mindset
To be able to save your money and become financially free, you might need to change your views around finances. This is not a time to blame yourself for your attitude towards it, but to just be really honest with yourself and the way you value money.
When I came back from travelling, I really struggled to save any of money from the first 3 months’ of pay checks. I had to take a long hard look in the mirror about my spending habits and the way I valued money at that point in my life.
For me, I’d spent so long away from real life, not earning real money or having a regular pay check that when I came home and started earning again, all I wanted to do was spend that money because I was scared it was going to escape me.
I had to remind myself that I was lucky enough to have a permanent job and I was going to be getting paid, every single month. That money was always going to come back to me.
A good lesson to learn is: just because that money is there in your account, it does not mean you need to spend it to benefit from it. You are benefiting from saving it.
Some views towards money that might be holding you back could be; not truly believing in the benefit of having savings; thinking there is not enough money to go around or that you need to spend all your money to benefit from it; thinking that you aren’t very good at saving so just giving up.
Take some time untangling the thoughts that come to mind when you think about money and try changing the way you think about it.