Saving money can be extremely difficult, with the most challenging part being staying focused and living for the future and not for now.
“One of the hardest aspects of saving money is that it can be difficult not to frivolously spend the money that you have access to,” says James Williams, Head of Marketing for Wonga.
“The best way to prevent this is to have a type of savings account that will not easily let you access your money, for example a fixed term deposit. This will prevent you from accessing money that you have saved until you really need it.”
Williams provides some tips on how to start on the savings journey:
- Save a percentage of your salary
Start by aiming to save 10% of your salary each month and place it in an interest free savings account (available at all major banks). Make sure you have access to these funds in case you have a real need for the money due to a financial emergency.
“If you are able to save 10% of your monthly salary, over 12 months you should have saved more than a full months’ salary,” explains Williams.
- Paying off debt vs. saving
Depending on the duration, interest charges and total amounts of debt, it can be cheaper to paying all debt off first before starting to save.
“Research whether paying off your existing debt at a faster rate than is required will save you more than saving money in a tax-free savings account,” advises Williams. “It is, however, important to remember that in addition to the choice you make between paying off debt or saving money, you should have an emergency savings account in place that should be equivalent of at least one months’ salary.”
- Payment arrangement
Some people might find that they are unable to save any money at all as their living expenses are equal to or exceed their monthly salary.
“This is a difficult situation to be in and often can lead to a downward spiral of debt until you are no longer able to service your repayment,” explains Williams.
“If this is the case, it is best to contact the financial institutions you owe money to and ask them about the possibility of a payment arrangement which may reduce your monthly expenses.”
- Create a budget
It is important to create a budget and closely monitor income and expenditure to find areas that you might be able to cut back a little.
“One great way to manage your budget is to set up automatic transfers or payments from your accounts when you get paid. This way you will save a set amount and still have a regular amount left over after any bills,” says Williams.
- Make sacrifices
Any saving goal really requires one to sacrifice smaller things in order to reach a goal.
“One thing that people do not realise is that it costs them a lot of money is buying lunch at work or buying a coffee every day. Obviously buying these isn’t a big issue once or twice, but they can really add up over the course of time,” says Williams.