The COVID-19 pandemic has brought savings back into the limelight. Even the most extravagant spenders are now taking stock of their resources and adopting austerity measures.
And why not? The pandemic has spared no one. While some are hit by the virus, others are reeling from the impact of the disruptions caused by it. Only those who have robust savings are the ones who are tiding over the crisis like a pro.
Most people, especially young professionals, rarely understand the right way to save and mostly use their surplus funds to increase assets, often completely overlooking the need to have an account that can take care of urgent needs.
Whether you are a millennial or a seasoned professional, this article is poised to change your approach towards savings. It will also provide you with a few awesome ways to save money. Read on to find out.
Why Do You Need to Save More Than You Spend?
Quite often, you would see people spending more when they are young and saving more as they get old.
As a rule, you must save more when you are young and less as your age goes north. During the early thirties, it’s better to save around 60% of your net monthly income. Keep reducing it by 1% with every passing year.
By taking the latter approach, you can always have a fair amount of money to spend throughout your life.
Let us now look at the top reasons that prompt wise people to save more than they spend, especially during the early part of their professional lives.
- Savings help you to deal with one-off emergencies without depending on costly loan options
- Savings can come in handy in case of sudden job loss
- Savings can help you to fund urgent business needs
- Interest income on savings is a foolproof way to make money without working
- Savings can provide you with peace of mind
Despite all the benefits that come with savings, sometimes you might need more funds to support you during times of crisis.
In case you need instant funds, the loan eligibility checker can give you a quick check on your loan eligibility and the maximum amount you can avail as a loan.
Availing a loan can also be useful if you do not want to withdraw your term deposits prematurely. Back of the envelope calculations suggest it might be more economical to apply for an instant loan rather than closing your term deposits prematurely.
The Ultimate Tips to Save Money Without Sacrificing Your Dreams
The year 2020 will forever be remembered as a black year in world history. If we still have to find something positive in this year, it has to be the fact the consumer credit has plunged by £7.4bn in April, even as households’ deposits jumped by a whopping £16.2bn. Hence, the UK has woken up to the fact that it is savings, and not spending, that can help them move into the future.
Let’s look at the ways in which you can restructure your financial portfolio.
1. Lay Down A Budget
Any well-structured budget has three parts – net income, gross expenses, and surplus.
Net income is your total monthly inflow across all income sources, minus taxes and associated charges.
Gross expenses include fixed and variable costs that contribute to the outflow. While fixed expenses include electricity, gas, grocery, and other such things, variable expenses are one-time expenses like buying a mobile phone or software.
The surplus is the leftover amount you have after factoring in the expenses. It’s prudent to save a major chunk of this amount at a place that will fetch you high returns without compromising on the security.
2. Check the Expense List and Curtail Costs
As you evaluate the expense list, you might discover a few areas where you spend more than you should. For example, you might be an avid shopper whose expense list is replete with items that can easily be avoided.
2020 might not be the best year to indulge in impulsive buying, as nobody knows what the future looks like. Be frugal, and try to curtail costs which may add up to your saving.
Remember that a wise person always spends what is left after saving, and not the other way round.
3. Save When the Month Begins
Quite often, people spend as much as they can or have to and save only what is left by the end of the month. This can be one of the worst mistakes any person may make.
As an informed investor, you must have a pre-decided amount that you need to transfer to your savings account at the beginning of a month. While this habit may seem taxing for the first few months, once you inculcate the habit of saving, your spending will automatically fall in line.
4. Use the ISA Allowance Wisely
Individual Savings Account, or ISA, is an account that does not require you to pay taxes. At present, the allowance is £20,000. You may either invest in Cash ISAs or Stocks and Shares ISAs.
As soon as you or anyone in your family attains 16 years of age, encourage them to open up an ISA account. You may also use the ISA allowance to save up for retirement planning, home purchase, or children’s education.
5. Evaluate the Returns Periodically
Financial institutions often change their interest rates faster than you can imagine.
As a prudent investor, you must check the returns that your account is generating. Set a time-frame for checking the accounts and do not hesitate to shift to a better financial institution that is offering higher rates.
Try to read the terms and conditions carefully before parking your money, though.
6. Never Stash Cash at a No-Notice Account
Experts would often advise you to keep lots of cash in an account that won’t require you to send a notice before withdrawing a large sum. While this can be a nice way to sail over short-term emergencies, when you factor in inflation, this format generates negative returns.
Figure out your requirements in advance and calculate the extra amount. Consider investing it in an account that generates higher returns.
The Bonus Tip – Clear Off Your Bad Debts
Credit cards are a nice way to finance your short-term financial needs without affecting your monthly budget. However, credit cards come in various types.
Sometimes, we don’t remember to settle off the dues with a credit card, which results in bad debt. A person with bad debt can face trouble to apply for a credit card.
In case you are dealing with an issue like this, credit cards for bad credit UK can come to your rescue. Go ahead, settle off your dues, and restructure your financial portfolio.
Conclusion
Saving can be easy if only you know the right way to approach it. Keep an eye on this space to learn more ways to diversify your investments.
