When every euro you earn seems to be absorbed by expenses, it can sometimes feel as if you simply can't save any money. So how do you take control of your finances and start setting money aside for the future when money is tight and particularly when there is so much financial uncertainty about in these difficult times.
Here are 5 steps to help you create a new savings habit.
1: Choose your savings goals. The first thing to decide is what do you most need to save for. There are probably a lot of things you want in life, but what do you need most right now and what's most important to you?
It could be money to spend on birthdays and Christmas, a staycation, a deposit for a home, a change of car or simply a 'rainy day' fund so that unexpected expenses don't knock your finances off-track. Or it could be something bigger, something that you’ve always wanted or dreamed about having some day. Maybe it’s to have the wedding or honeymoon of your dreams, or maybe it’s to own something valuable that might appreciate in value, such as a piece of art.
Write down how much money you will need for each of your goals. Then decide which one to start saving for first. You can use this handy link /save-and-invest/savings/savings-goal-guides/
2: Work out how much disposable income you have. You need to find out how much disposable income you have left after you pay for all your essentials. This includes things like rent/mortgage, electricity, gas, food, medical expenses, insurance etc.
Write down your income each month or week after tax, add up the cost of your essential spending, then take the cost of your essentials away from your income. Whatever is left is your disposable income.
3: How much can you save towards your goal? You might decide to save all your disposable income towards your most urgent goal. That might work for a short time, but most of us need an occasional treat to keep us motivated. Once you've worked out a realistic savings amount, take the cost of your goal and divide it by your weekly or monthly savings.
How many weeks or months will it take you to save up the money you need? If it’s going to take you too long, then you might want to take another look at your goals and adjust them to fit.
4: Set up a separate account for savings. It's important to separate your savings from your day-to-day spending money so that you’re not tempted to spend what you've saved.
You can do this by setting up a separate savings account and automatically transferring your savings into it as soon as you get paid each week or month. This gives you an incentive to only spend the remaining disposable income - and to get used to managing on this amount. This approach is sometimes called 'paying yourself first'.
5: Start saving. Remember to review your savings regularly to check that you are still on track. It's not unusual to have a few financial ups and downs, but don’t be tempted to stop saving. You can always adjust the amount you save if you need to and raise it again later.
Disclaimer
Life assurance and pensions products are provided by New Ireland Assurance Company plc., trading as Bank of Ireland Life. New Ireland Assurance Company plc., trading as Bank of Ireland Life is regulated by the Central Bank of Ireland.
Advice on Bank of Ireland Life products is provided by Bank of Ireland, trading as Bank of Ireland Insurance & Investments. Bank of Ireland trading as Bank of Ireland Insurance & Investments is regulated by the Central Bank of Ireland.
Bank of Ireland is a tied agent of New Ireland Assurance Company plc trading as Bank of Ireland Life for life assurance and pensions business.
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