By Jennifer Bowden
According to the Journal of Clinical Psychology, around 46% of people made financial New Years’ resolutions for 2013, with the key objective being to save. The reality is that almost 40% of these won’t have fulfilled their intentions.
It’s not easy to stick to a savings scheme. For most of us, money goes into a current account every month and we’re determined to save some of it. But somehow we don’t get round to transferring it, it vanishes, and before we know it we’ve spent our entire wage before month end. Oh well, perhaps next month…
Despite all our best intentions, saving is just one of those things that routinely gets left by the wayside. We’ve collected 24 tips to trick yourself into savings discipline, so by the end of the year you’ll be well on your way to building a tidy nest egg for the future.
A lot of people fall at the first hurdle by not being realistic about their savings capabilities. These days, there’s a lot of speculation about the affordability of later life, not to mention getting a mortgage, weddings and children. the list is endless. When people realize just how much they’ll need to save, the tendency is to panic. But this is almost always counterproductive to longevity. The key is to save little and often – don’t try to overstretch yourself by putting unrealistic amounts away as you’ll struggle to keep it up.
Treat savings like bill payments
For most people, bills are set up to come out of a current account automatically, so as well as always ensuring that the money is there, they acknowledge that it’s going and never count it as their own to begin with. Why not treat savings in the same way and set up a direct debit from your current account to a separate savings account? A good tip is to arrange this to go out almost as soon as you get paid so that you barely even notice it was there in the first place.
Don’t acknowledge salary rises
It’s great to get a raise. But when it happens there’s always the temptation to automatically increase living expenses – maybe eating out once or twice more in the month, splashing out on a couple of extra pairs of shoes or even upgrading a car or living space. Sometimes, it might be beneficial just not to acknowledge a wage increase and instead automatically put the difference into a savings account. It doesn’t make a difference to your lifestyle, but it could have a real impact on your savings pot.
Create targets and review regularly
Fail to prepare and prepare to fail. Not having a defined goal or target can often lead to inertia. Everybody needs to plan for later life, no matter how old or young, and the reality is that 75% of us just aren’t preparing effectively.
It goes without saying that not everyone can save at the same rate or in the same way. For best results, take time to do your sums and choose goals that are both positive and work towards an end result, but that are achievable for your current financial situation. Secondly, circumstances change all the time with regards to finance; you might pay off a debt or find yourself with a short-term savings goal that needs to take priority for a while. Review your goals regularly to make sure you’re doing the best for your situation.
Set a weekly budget and carry cash
Something that has really helped me personally in the past has been to set a weekly budget after rent and bills, just for food, travel and socializing, and getting the cash out in advance to make sure I didn’t go over. This is a really effective way to rein in spending and understand where money goes. You start to think more about whether you really need certain things and for me especially, it helped to cull daily extravagances like buying lunch out every day rather than taking my own to work, which really adds up over the course of a few months or a year.
This is a simple one: try to carry a small amount of change with you at all times so you never end up breaking into notes just to get coins.
Take advantage of offers and coupons
Think how often you find yourself getting a coupon from a store you visit regularly. All too often, this ends up forgotten in the bottom of your purse or wallet, or thrown in the bin. It takes a bit of effort to make sure coupons are used, but if you get organised and make sure you do put them to work, you’ll be surprised just how much you can save on a weekly shop.
Get to grips with shopping psychology – when is a deal not a deal?
Likewise, always shop for deals. This is one that we all probably do when we’re in the supermarket and it usually turns out well. However, one thing it does always pay to be aware of is that supermarket deals are not always all they’re cracked up to be. ‘Money off’ deals can sometimes be misleading, and although authorities have made moves to clamp down on this in recent times, unfortunately, it doesn’t stop it from happening.
Some tricks include:
Crafty comparisons – where items are offered as better value because they’re sold in a bigger pack or suggesting that a product has been reduced when it’s actually sold in a smaller portion size.
Yo-yo pricing – where products are sold at an inflated price for a short period before being put ‘on offer’. The discount price period lasts longer than that initial higher price, making that the normal selling price so that there was never any deal at all.
Bulk buying – sometimes, buying in bulk is not more economical. Shoppers can end up paying more if they stock up on ‘Buy One Get One Half Price’ or ‘25% off’ deals rather than just purchasing a larger pack.
To make sure you’re not being ripped off, it’s advisable to shop by unit price. In most supermarkets, food will be clearly priced by weight or volume underneath the pack price, to compare products and identify the best deals.
Open a ‘deals’ account
Once you’ve successfully navigated the ‘deals’ minefield, take a few minutes to work out how much you’ve saved per shop and put the difference in a separate account or jar. Even if it’s only a small amount every week, it all adds up over time and could be used to help fund annual costs like Christmas and birthdays.
Start a change bank
Every time you find yourself with a lot of loose change weighing you down, take it out of your wallet and keep it in a jar. In your wallet, loose change is all too tempting to spend on bits of things you don’t really want or need like sweets and chocolate. Though it’s not much, if you keep topping up the jar with little and often you might find that it pays for a night out or some new clothes.
Lock money away in a fixed rate account
Fixed rate savings accounts tie your money up with no access, so it’s easy to pretend it doesn’t exist. The fixed rate accounts that will glean the greatest return require you to make one lump sum deposit, which is then tied up for the term of the account agreement so there’s no dipping in.
Or failing that, a notice account
Some savers prefer the flexibility of a notice account, which may still require an initial lump-sum deposit, but allows further deposits to be made throughout the term of the account. This in mind, you could set up a direct debit from your current account to a notice account for when your wage goes in, so you never really have the money at your disposal. With a notice account, you can only make limited withdrawals following a notice period, so although there’s less temptation to withdraw, you still retain the security of having access to your cash if you need it.
Use your workplace pension or 401(k) plan
At the very least, you should be investing money into your company pension scheme. This is probably the easiest and most lucrative way of ensuring funds are available in the future as it essentially acts as a pay rise. When you make monthly contributions, your employer will also make relative contributions on your behalf. Plus, it’s taken straight from your wage, so you never get an opportunity to miss it.
There’s an app for that
Sometimes just keeping a log of spending behavior can be a really effective wake-up call for identifying bad habits and realizing where saving opportunities are being missed. best of all, there are apps that help you save money as well as apps that help you earn money.
Swap out expensive habits
Everybody has certain weaknesses when it comes to spending money, and quite often these go under the radar. Try to identify where money’s going on a daily basis (the above apps are a great tool for this), and think about where you could make slight changes. Here are a couple to start you off: Replace buying lunch every day at work with making sandwiches at home, Replace a coffee and a muffin en route to work with a hand-made cup and cereal bar when you get into the office, or; Replace dinner out with friends with a homemade meal at one of your houses. Each of these quick fixes can be arranged at a fraction of the cost.
Pay yourself after you’ve paid off a debt
Paying off a debt is wonderfully liberating. But after a month or two you’ll barely notice the difference once you’ve adapted to your new spending limits. Although it’s tempting, try not to let yourself get carried away with the extra money at your disposal. Instead, arrange a direct debit straight into a savings account. That way, you’ll never miss the extra because you never had it to begin with.
Keep a record of every credit card transaction so there are no surprises
Simple: when you spend on your credit card, write it down. There’s nothing more unsettling than an unexpected credit card bill because you forgot you bought something, and it’s this kind of thing that can quickly lead to debt.
Get rid of unused direct debits
If you haven’t been to the gym for the past six months, it’s time to get rid of that membership. Likewise, check you’re getting the most out of your phone contract, TV subscription, and internet package…basically anything you’re paying for on a monthly basis. Most of us are involved in some sort of package deal that could be reduced but don’t bother to investigate the options.
Sell, sell, sell
Everybody likes to add a few new items to their wardrobe when the season changes. Don’t just leave last year’s unwanted clothes gathering dust in the back of your wardrobe. Instead, put them on an auction site like eBay, where there are millions of potential buyers all looking to put together a new wardrobe of their own. And it’s not just clothes. Every so often have a good clear out; you’ll be amazed how much stuff you accrue that’s just lying around. Be brutal – if you’re not going to use it, get rid.
Don’t live paycheck to paycheck
A lot of people assume that they need to live according to their means. Of course it’s wise to live within means – but that doesn’t mean that the full amount needs to go every month. Decide how much is reasonable to live off and stick to it. Yes it’s nice to have treats from time to time but getting too used to them on a regular basis is no good for your nest egg.
Stop equating money with happiness
Money is a means to an end, but quite often people associate having money with success, affluence, and ultimately being happy. If you can change the way you think about money and material objects, you’ll feel less inclined to spend too easily.
Assess lifestyle choices
Sometimes, it just makes sense to do certain things that you might not want to. Living with your parents, for example, is one such scenario that, though not ideal, will help you save and ultimately help you get your foot on the property ladder quicker.
Freeze your credit card
Ok, potentially a little extreme. But it’s effective.
If you have trouble controlling spending habits, try placing your credit card in a glass or tub of water and freezing it solid. That way, next time you have the urge to spend you’ll have to wait for the block of ice to melt. The idea is that by the time it’s thawed you compulsion to spend will have passed. And don’t try cheating – attempting to free the card in the microwave will just damage it.
Kill crazy purchase ideas with a ‘lust list’
Basically, write down everything you find yourself with an insatiable desire to buy in a notepad. Keep this notepad with you and update it every time something else comes up. You’ll be amazed how often you find yourself questioning the things that feature on there and it might just help you to think twice before going in for that must-have designer handbag next time. Building savings is one of the hardest things to achieve, but it’s becoming more and more imperative to do so. With the above 24 ways to save, there’s something everyone can do to beat procrastination and get some cash stashed away for the future.
(Photo courtesy of Felix Montino)
This article was contributed by Jennifer Bowden, a specialist finance writer and blogger. Jennifer currently covers a range of personal finance topics on behalf of Aldermore, a leading independent bank.