Let’s be honest with ourselves: most of us are short of cash. Even those who earn a decent salary can often find themselves eeking it out at the end of the month – while others are forced into severe budgeting just to stay afloat.
An exclusive study by HuffPost UK and BBC Radio 5 found two-thirds (65%) of people in their 20s have less than £500 in savings – and 30% have none at all.
One lost payday, a lost job or a huge bill could tip most people into the red.
Add to that the expenses of our day-to-day lives – student loans, travel cards, running a car, phone, rent and utility bills – some which we can plan for but many that surprise us – and you can be left with little cash to build secure foundations for the future.
You work to live. So if you’ve got a decent-ish income but zero savings – how do you start creating a money buffer?
1). Take A Long Hard Look At Your Spending Habits.
What’s more sobering than staring your finances right in the face? First things first: write down what you earn, what you spend, and how much you have left. Once you have the facts, you can prioritise your next steps.
If you have debts, for example, or are in your overdraft, work out what’s costing you most in interest and pay that off first. It might be best for you to clear your overdraft, for example, as it incurs more costs.
Next, look at your outgoings. Are you giving away half of your monthly salary to Asos, Costa, or Boohoo? Are you signed up to Apple music, Amazon and Spotify, when you don’t need to be using all three? Or what about that gym membership you convince yourself you’ll use more than you actually do?
Then there’s the money we spend on eating out, coffees before work and lunches eaten al-desko. It all adds up.
If you get real with yourself about what you need to splash the cash on – and what you don’t – you might find you have more pennies left to play with.
Online tools can help to give you an overview of your spending habits. Most bank accounts will offer a way to see what percentage of your outgoings are spent on things like eating out and travel.
2). Choose A Better Bank Account.
Now you know how much money you have to play with, it’s time to work out what to do with it. Whereas previous generations lucked out with high interest accounts, you have to work a little harder to grow your cash these days.
But, there are ways you can move your money to avoid it sitting in your account doing nothing. Shop around to see what savings accounts offer the best interests and incentives to switch. Money Saving Expert scours providers for deals and keeps an up-to-date list of the best rates here.
Consider shifting your money into an ISA, too, which pays interest that is tax-free (great if you’re loaded). You can invest up to £20,000 into ISAs. Compare the interest paid on them first – though don’t expect to earn much more than 1.5% at the moment.
3). Kickstart Your Saving Habit With An App.
You’ve trimmed back your unused subscriptions, worked out where to stop splurging, and moved your money into the best account. Now it’s time to use tech to save you some cash.
Think of it it as the equivalent of people putting money in jars to go towards different expenses – these days you can do that digitally with minimal effort.
One easy way to start is to open a side account with your bank and set up a direct debit on payday into a savings account. Whether that’s £10 a month or £200, it’ll keep building (so long as you’re strict with yourself and don’t touch it) – and can go towards building your buffer.
It’s relatively painless if you do have the spare cash. Start saving £50 a month now, by this time next year you’ll have £600 – you could spend that on a holiday, of course, but keep it in your and it’s something to fall back on. If you can manage to put aside £100, that’s £1,200 – a pretty decent buffer.
If you bank with HSBC, Santander, Lloyds, NatWest, Nationwide, RBS, TSB, Halifax, First Direct, Co-operative Bank or Metro, you can use an app called Chip, which calculates how much you can afford to put away – and deposits it into savings automatically so you don’t have to.
Or, apps like Money Dashboard can help you keep an eye on your finances in detail – and make it easier to squirrel away savings for a rainy day.