If you’ve finally got that career you wanted, you’re managing to buy proper food rather than Pot Noodles and things seem to be going in the right direction, congratulations! Now it’s time to thinking about your future and the things that you want to achieve in life by focusing on your savings and potentially start investing too! The latter might seem like quite a leap, but investing is something that can be more accessible than you think and the earlier you start the better. I’m really passionate about saving but this isn’t something that I’ve always done and I really wish that I had because when I think back to the amount of money that I wasted when I was younger it makes me shudder!
Consider this post Tips For Saving & Investing… from someone who wish she’d started younger!
Whether you’re fresh out of your college course, university or apprenticeship and into your first job on the career ladder, its easy to want to go crazy and spend all of your earnings but let me tell you from experience, its no fun living pay cheque to pay cheque. I had friends around me whose parents would take a cut of their salary off them to put into a savings account and at the time, I thought that was so harsh but now I realise just how beneficial that was for my friends in the long run. By taking money out of your account as soon as you get paid and moving it into an account that you can’t easily access, you’re learning to live with less from the very outset and that makes things so much easier further down the line. Usually when you just start work, you don’t have hundreds of pounds of bills coming out of your account, especially if you’re still living with your parents but as you get older, your outgoings tend to increase, so if you get used to living on less money day to day from an early age then you’ll not feel the pinch quite so much when you move out and rent or buy your first property.
START SMALL & SAVE AFTER PAYDAY
My top tip for saving, regardless of whether you’re just starting out in work or have been working for years but not saving effectively, is to have a proportion of your wages go out of your account by standing order as soon as you’ve been paid. If your outgoings are low and you’re saving for the first time, you could go for around 25% of your salary (I wish I’d done this when I was younger!) but if, like me, you’re starting saving further down the line then go for an amount that you wont miss, however large or small. So many times people put money into their savings account and then end up transferring it back into the current account before the end of the money so start with an amount that you wont miss, perhaps the cost of a night out or a takeaway and build up from there. It would be great to be able to save £100 a month but even if its £10, its a start and that way, you’ll not find yourself reaching for it before the month is out. Then, at the end of the month, top it up with whatever you have left and don’t need in your current account.
SAVE WITH ANOTHER BANK
Go for an easy access account that you can get to if you need it but keep it away from your current account if you can by opening a savings account with another bank. That way, its there if you’re desperate but you’ll not be tempted to dip into it every time you open your online banking.
SAVE YOUR LIVING COSTS
While it’s great to have a savings goal for a holiday or a new car purchase, make saving for your living costs your first priority. Aim to get the equivalent of 1 months living costs saved into an account and then go for 2 months and so on. In an ideal world, I’d love to have 6 months worth of bill money saved up just incase anything happened to my job but that’s quite out of my reach at the moment so I’m aiming for 3 months. I’ve got my first so just another 2 to go! I’ve found that saving gets addictive; once you see those numbers adding up, you’ll be more inclined to keep adding to it and less inclined to want to spend it.
TAKE ADVANTAGE OF TAX FREE SAVINGS
There are so many tax free savings options available at the moment, including ones that can really help those who want to get onto the property ladder or save for their retirement. Namely the Help To Buy ISA and the Lifetime ISA. I have one of the former and I am currently deciding who to go with for the latter as I think that it’ll really help to give me some extra savings for when I retire. There are regular cash ISAs available as well that aren’t linked to buying a property or retirement as well as Investment ISAs, also known as Stocks and Shares ISAs which do come with some risk involved whereas with a Cash ISA, you will always get back what you put in, plus the interest, unless the account has a penalty clause.
ALWAYS COMPARE ACCOUNTS
When choosing a savings account, always compare the interest rates and the terms of the account such as access and penalties for withdrawal and choose the one that’ll suit your needs the most. Regular savings accounts do generate interest but the rates on savings are at a low at the moment with some accounts offering rates as low as 0.1 to 1%. Not only are ISAs tax free but those accounts along with monthly saver accounts will often give you a better interest rate than regular savings pots but keep in mind that you’re often limited to how much you can pay into them in any one calendar month or tax year.
GROW YOUR MONEY WITH INVESTMENTS
Once you’ve built up your instant access, cash savings to a level that you’re happy with and have been able to maintain it comfortably without dipping into it to withdraw cash to replenish your current account, then you could consider investing. Making an investment with part of those funds or additional funds is an option and could mean that you’re able to grow your money further which could benefit you more in years to come, especially as with inflation, your money will technically be worth less in the future. Think about how much 50p bought you ten years ago compared to now, or even think about how much a Freddo cost when you were a kid! According to Business Insider, inflation takes an average of 3.87% of your money’s value every year, so you need your money to be able to outpace this. If you think how much 50p bought you 40 or 50 years ago then you should get an idea of why investing might be the best way you can grow your money. It might be a long while off before you can afford to start investing but thinking about it when you’re young is a smart move.
Investments can come in many forms from stocks and shares to a property purchase or business shares but always remember that investments can go down as well as up; nothing is ever guaranteed. I’d always recommend speaking to an independent financial advisor first and foremost and doing your research online so that you can make the most considered decision before choosing where to invest your money.
INVESTING IN PROPERTY
Property is one of the most popular forms of investment as bricks and mortar assets can increase in value and earn you a passive income at the same time too which could end up being a way for you to retire earlier while still generating a monthly income which is fantastic especially if there isn’t a buy to let mortgage remaining on the property. Plus it is there for you to live in if you need to in the future and of course you could always sell it at a later date if you needed the funds to put towards your dream home or for that around the world trip when you retire. Sometimes it’s even better to look into buying a property in another area for investment to help you on the way to purchasing your dream home as the house prices in some areas are very high.
In the UK, the average deposit for first time buyers is a huge £51,821, and although this is greatly skewed by high value areas particularly in the south, this could rise to £65,930 in five years and £81,468 in ten years so it is really worth thinking about what your strategy is if you are looking to ever purchase a property. In certain areas of the UK, like Liverpool, Manchester and Sunderland near where I live, you can purchase an entire property for less than the amount needed for the average UK deposit and rental demand in those areas is high too so renting it out shouldn’t pose an issue. There are even property investment specialists like RW Invest who have opportunities to invest in property from just over £50,000 for an entire apartment, with assured rental yields giving you a constant source of income. You could invest in a property where the monthly rental payments you receive from tenants are higher than the mortgage you are paying, allowing you to build up your savings further and you may even be able to sell the property for more if you want to purchase a home.
Managing your finances, saving money and investing in this day and age is hard, especially as it’s something that the majority of us weren’t taught in school. I’m renting my first apartment at the moment while I’m saving to buy my first home and rather than thinking of it as money down the drain, I look on it positively as when I come to buy a property, I’ll already be used to pulling out so much money a month. Sure my savings are taking longer to build up but I’m so proud of what I’ve achieved so far. I’ve worked in banking in the past with people from all walks of life from the really rich to the very poor and each comes with its own set of problems, stress and worries. One thing that is for certain though is that having money in savings, in whatever form will only help you and be of benefit.
Are you an avid saver or have you wasted money over the years? Do you like to invest your money in property or do you prefer to see the cash build up in your account?