Do you struggle to know how to save?
Do you feel like you need every last penny you earn just to get through the month? There’s never anything left over for saving?
Or are you in debt and having to pay this off first before you even think about saving?
Well even when you think it’s impossible to save there could be a way.
Here are 3 ideas that can get you saving even when you don’t have any money.
Finding it hard to know how to save
I stole the idea for this blog post the other day when listening to a podcast show called ‘Listen Money Matters’. I highly recommend listening to the show if you want to hear two guys drinking beer and swearing about money. It’s definitely a different take on things!
It’s hosted by two Americans, called Andrew and Matt, and whilst the money themes they discuss are based on the US population most of it applies to the UK too.
In terms of trying to save when you don’t feel you have anything left over from your salary each month, I’ve been there recently.
I left my secure job and decent salary over a year ago to start my financial planning business. I went from contributing a large amount to my pension and other savings accounts to saving nothing.
This was really hard for me, especially when my job is helping people to save and invest day in day out!
During the early days whilst the business was building, I felt I just couldn’t do any saving as every penny I earned had to ensure the mortgage and bills were paid.
I hear this a lot from other people too. Especially when you are starting out in life and your career.
You may be:
- Have high living costs (especially if you live in London).
- Have a family to provide for.
- In debt and paying off credit cards.
You need every penny you earn for now.
Even if you do save, your priorities may be to get on the housing ladder so you are definitely not thinking about your long term future and retirement at this stage.
So is it possible to save or even invest when you spend all you earn?
Yes it is and the sooner you can start to implement some of these habits the more your savings will build.
OK so there is the obvious stuff when it comes to finding some money to save and this involves reducing your spending.
- Get rid of Sky and consider Now TV and other streaming services instead.
- Eat in more than you eat out.
- Walk to work if possible.
But I get that it’s not always easy to do the things above, particularly if you really value these experiences.
So try one of these ideas instead.
This is how to save when things are tight
#1 – Let your employer and the government save for you
So what I’m talking about here is pensions and your retirement savings.
I warn you now. If you don’t have your own pension in place now you are probably going to be working well into your 80s.
Now your employer should already have set up a pension for you and you may be making some small payments in. These contributions will probably come straight out of your salary before you even realise.
But did you know that every time you put money into a pension the government top it up by 20%. They basically give you the tax back you paid on this money.
So contribute a £100 to your pension and the government will pay in an extra £25.
What’s more a lot of companies now match what their employees pay in. So you pay in £100, the government pays in £25 and your employer pays in another £100. That’s £125 free money!
So if you don’t have a pension, get one set up and pay at least something in. You don’t want to miss out on all this free money. Get your company to deduct it straight from your salary so you don’t even notice it.
Think about it. There’s a reason tax is taken out of your salary before you get it. They don’t trust you not to spend it!
#2 – Stop paying fees
I mean bank account fees and overdraft fees in particularly.
Some banks charge an account fee for additional services like mobile phone insurance and breakdown cover. The deal is probably not great so you need to question whether you really need all the bells and whistles of the premium account.
Next, obviously it’s a good idea to never have to use your overdraft as the usual high street bank fees can be extremely high.
But if you really need to use your overdraft there are banks out there that will charge you next to nothing to use it.
I wrote a blog a while back on which challenger banks are paying interest which includes details of their overdraft processes.
#3 – Round up your spending
So perhaps you can’t afford to take advantage of the free money paid into pensions or you have more immediate savings priorities rather than saving for retirement.
Is there still a way to save when you have nothing left over?
Well try this. Every time you spend, round up the cost to the nearest pound and deposit the difference into a savings or investment account.
Here’s an example, say your drink of choice down the pub costs £3.75, you put 25p into savings.
Now you may think that’s a lot of effort for 25p every time, but say you did 4 different spending transactions every day and the average round up was 25p.
That’s £1 a day. Over a year that’s £365 and if you earned 6% a year investing it, your total pot could be worth just under £2,000 in 3 years time! Just spending as you normally would.
Better still, Moneybox is a service that will automatically do this for you.
You link your card to Moneybox and they will round up each transaction automatically and invest the spare change for you.
So you see it is possible to save even when you feel like it’s impossible because you don’t have any spare cash.
- Make use of the free money that could be paid into your pension.
- Move away from banks that charge you excessive fees.
- Round up your spending and save the difference.
There’s always a way.
What’s an ideal amount to be saving each year?
Well 10% of your earnings is a good starting point but anything is better than nothing. It’s the earlier you start that counts.
Starting now rather than waiting a few years can actually have a greater effect on your total savings than starting later and saving more.
If you can, automate saving as much as possible. Your future self will be very grateful.
QUESTION: Do you have any savings hacks? Please share them in the comments below so others can benefit.