Cast your mind back to the start of the year when you made your resolutions for the year. Was saving money on your resolution list? I’ts been on mine for a few years running and it hasn’t been easy – I can tell you that part for free. I’ve just reached my savings goal and it feels amazing! It’s been worth all of the sacrifices, even if at the time I didn’t think it ever would. If you’re like me, and don’t have the Bank of Mum and Dad to rely on to buy your first home then I hope you find some of my tips below helpful.
Saving Tip 1: The B word. Budget!
This is a very important starting point because it allows you to create a spending plan for your money. It will also ensure you will always have enough money for the things you need and the things that are important to you. Each month you should be able to write a budget forecast of all your income flowing into and out of your bank account. Note down your ‘essentials’ that are pretty fixed in payment such as rent/mortgage, travel expenses to work, phone bill, gym membership, food shopping etc. Then note down expenses that will vary each month such as nights out, birthday gifts, vacations. Planning and monitoring your budget will help you identify wasteful expenditures as well as helping you to be proactive with reaching your reaching financial goals. I set an intentional money plan which worked well as I didn’t feel like I was restricting myself. Look at it a bit like dieting, treat yourself to the chocolate bar at the end of the week but don’t eat one every day.
Saving Tip 2: Stop buying what you don’t need!
Have you ever been to a shop with no intention of buying anything just in a bid to ease boredom or make yourself feel better? Coined years ago as Retail Therapy – helping women get through any crisis apart from saving money. Financially this is crippling behaviour and will not get you any closer to your financial goals. The truth is, if you want to reach your goal quickly then buying new clothes each month is not going to help you. Be more mindful of your spending habits when it comes to impulsive spending. Do you really need another pair of boots? If you’re still thinking about them a week or two later then make some room in the budget for them. I can honestly say I don’t miss any of the items I wished I had bought but if I wanted to buy them now, I wouldn’t feel guilty as I prioritised what was important.
Saving Tip 3: Purse check
Have a closer look at items you find yourself buying every week. This way you will be able to know exactly where your money is going and which areas you’re overspending on. You might realize, that Starbucks coffee at the train station every morning isn’t really necessary or Tthe Taxi to and from the station. The average Londoner spends an average of £35 per week on lunch alone which translates into £140 per month! I get that it sucks and means less time in bed but making your lunch at home can really make a difference. Realise how much you are actually spending and put appropriate limits on it to make sure you are able to save accordingly. You’ll feel more in control of your money, and it’s a key step toward forming a realistic budget that you can stick to.
Saving Tip 4: Needs vs wants
We all work really hard for our money and it feels really good when we get to spend it and treat ourselves (I know this for sure!). However in order to have a clear savings plan in 2017 it is very important to think about the difference between essential spending and luxurious spending. Many of us get into a routine of treating ourselves to pricey toiletries, clothes, and other goods a little too often! A good place to start is our beauty routine. How often are you having your hair and nails done for example? Adopting some DIY treatments at home can be a game changer if you’re usually someone who spends a lot on beauty products. If you’re someone who eats out a lot, then having more nights in and hosting a games night is much more cost effective. Small changes will make a big difference.
Saving Tip 5: Get the best interest rate
Nowadays, interest rates are low across the board but it’s still worth seeking out the highest rate in order to maximise your savings. If you’re a first time buyer like me, the Help to Buy ISA pays a higher rate than most other accounts but I also noticed that some current accounts such as the Santander 123 Account were paying more than ISA accounts. I found this out by looking on a price comparison asite which was really simple.to do. In April, the Lifetime ISA is being introduced which I’d recommend for anyone who is saving to buy their first home.
Saving Tip 6: Learn to pay yourself first
This sounds like a strange concept right? However, as you budget correctly each month, this step will become second nature and part of your monthly routine. This was the most effective change I made and it was so simple! Ask your bank to set up a regular Standing Order that will transfer a fixed amount of money from your current account (or wherever your salary gets paid into) to your savings account every month. This really helped me get into a routine and motivated me to save more once I saw the balance increasing.
Saving Tip 7: Compare before you pay
I have saved lots of money in the past when I have taken the time to compare costs of major items before actually making a final purchase. That way you can find where the item is cheaper elsewhere so it pays not to spend impulsively. When you have a strong desire to save for something that means a a lot to you, do your research and shop around before making high cost purchases because it makes such a difference to your savings pot. There usually is an alternative somewhere else offering the same thing!
The key message I want to share is that saving for a home deposit has been a journey full of ups and downs but the key thing to remember is to keep going even when it feels tempting to give up. Buying a home will probably be the biggest purchase you’ll ever make, so don’t feel disheartened that it’s taking a long time to reach your goal – the time will pass anyway. Good luck on reaching your savings goal!
Amaka works in the Brand & Attraction team at EY and in her spare time she blogs for GirlsTalk London. http://www.girlstalklondon.com/