How to Save

Whilst doing my research, all I could come across were writers compiling to-do lists to help you save, but here I want to make it a discussion and talk about the concept of saving, as well as its benefits. I am no financial advisor, I say that with no shame, I don't want your blame :).

Saving has a lot to do with your relationship with money. Generally, we learn our money habits from, mostly our parents but also our closest friends and the social circle we being to. Money has a way of just disappearing unless stringently accounted for. The little purchases really do add up. This is why budgeting and putting some away is important.

Discipline and delayed gratification is the name of the game here.

Here's my Saving 101.

Why Save?

In this era of fast-paced technologies and trends, it is so easy to fall into the trap of consumerism and wanting. With social media aiding in the dispersion of said trends, it is simpler than ever to see all the purchases of those in your social circle; who wouldn't want to get involved? Whether it be the newest iPhone, or the latest Louis Vuitton garment.... you work hard, so you deserve it.

Why would one save anyways when the money can just be made back?

As true as this statement may be, it is a stagnant mindset. The word stagnant suggests a net-zero effect but arguably, it actually has a negative effect on your finances. I say this due to opportunity cost, and the small but definite devaluation of your money due to inflation leaving you stuck in a non-progressive loop.

This loop is otherwise known as the rat race or living pay-check to pay-check. Spinning the wheel but getting nowhere. Struggling to make ends meet. This leaves one in a vulnerable position where any unforeseen occurrence could lead to financial calamity.

In the UK, according to a survey carried out by CareerBuilder, 31% of workers are said to always/usually live paycheck to paycheck to make ends meet, barely or never saving anything at the end of the month. This way of living prevents leaving a job you hate as you simply need the income to survive. It is important to break away from this.

Other reasons to save include investment oppurtunities, donation & being generous as well as freedom. Read on.

Budgeting

From the formula below it can be seen that there are two main ways of saving more! The first being earning a larger salary or appending income sources. The second is to reduce your monthly expenditure, the latter often being easier.

Saving = Income - Expenses

Calculating your monthly expenses and creating a budget will greatly help you in living below your means. Sum up all of your incomes and outgoings (allowing a buffer for irregular expenses). The difference between these values of course will be your saving capacity. This number needs to be maximised, as saving £50 a month will take far too long to reach your goals - Aim for £500 and above if possible, looking to always increase this number to speed up the process. This part requires financial discipline, not so easy.

Make a list of all your outgoings: rent/mortgages, phone bills, streaming subscriptions, even your pet Iguana's food. Some things must be sacrificed (Oh no!). It's quite common to see active subscriptions which you rarely use e.g. amazon prime or that gym membership (oops 😅). Here's where you need to get real with yourself, you are going to need to cut off a lot of luxuries. It'll be worth it in the long term, believe me.

The goal now is to stick to this budget and start building up a sum in a savings account. This sum will be your 6-12month emergency fund, which is roughly 6-12 months worth of living expenses. So, get the number you calculated for all your monthly outgoings and multiply it by 6 or 12. This is your target sum. An emergency fund allows you a bit of breathing room. It gives you the capacity to try new things as you have a nice cushion of money to fall back on. As the name suggests, however, it is only to be disturbed in the case of an emergency. You must continue to save to fund investments and luxuries.

This fund could take a year or more to build so be prepared. The amount you save monthly will determine how long this period will take.

As an example, if person A's monthly income is £1,000 and their monthly expenses together add up to £900, they can manage to save £100 a month. Their 6-month emergency fund target would be £900 x 6 which is £5,400. With their £100 monthly saving, it would take them 54 months, or 4.5 years to reach this amount.

Person B on the other hand, with the same £1,000 wage but a monthly expenditure of just £500 (very low I know, these are just examples). They can save £500 a month, giving them a 6-month emergency fund of £3,000. They would reach this fund in 6 months or 0.5 years. (Even a monthly expense of £750, saving £250 monthly, with an emergency fund of £4,500, takes 18 months, or 1.5 years).

Reducing your expenses largely affects your capacity to save as your required emergency fund is much less AND you can also save at a faster rate.

Sneaky Outflows

Every little helps and the little charges really do add up. Making small savings in places and cutting out small expenses really does help contribute to improving your financial situation.

Here is a list of the most common and sneaky holes in ones pocket:

1. Eating out
2. Cab journeys
3. Fashion trends
4. Alcohol & Drug Use
5. Credit Cards
6. Monthly Subscriptions
7. Mobile Phones
8. Car Finances
9. Overpriced rent

Cheat Codes

Some quick fixes/ direct alternatives to the list above.

1. Instead of eating out, learn to cook at home. Doing a weekly shopping and avoiding waste will largely reduce this cost. Leave eating out for special occasions.
2. Utilising the public transport system where possible will greatly improve your potential to save as £20-£30 cab journeys quickly pile up.
3. Fashion is a very deep hole to keep throwing funds into, with trends changing by the season. It is hard to keep up whilst trying to build a foundation. Adopt a modest style and save yourself the hurt.
4. Alcohol and drugs are remarkably expensive! Did you know that drugs such as Heroin, Cocaine & LSD are more expensive per gram than Gold?? ($130, $236, $3,000 & $56 per gram respectively). Keep their consumption to a minimum. And IF you're addicted, the cost of therapy will still work out far cheaper.
5. Credit cards are a tool used by banks to incentivise borrowing! Interest is a large source of income for banks. Credit cards also have the ability to make you buy things you don't need or can't afford. Credit cards aren't inherently bad but great discipline is required - cut yours up if you can't manage.
6. A good tip here is to share subscriptions for Apple music, Spotify, Netflix, Amazon Prime and other similar services. Group together your friends and enjoy paying £3 a month instead of £13.99.
7. Once your contract is up and your phone is still perfectly functional, there is no need to upgrade to the latest gadget. Switch to a SIM only plan and stick to it for as long as you can. Manufacturers release a new product each year to instil a pressure that drives up their sales. £12.50 a month vs £79 monthly.
8. Car Finances make newer cars seem affordable by quoting prices like £300 a month but don't forget the costs associated with owning a luxury vehicle. Things like insurance, fuel, parking & servicing can spike the total car bill to £800- £1,000 monthly. Instead, invest in a small run around whilst building a foundation.
9. Living in a luxurious apartment can be a huge drain to your finances, it could make sense in some scenarios to downsize for a while whilst building up your finances.

There are also general methods to apply that help in the process. These include making multiple accounts with different purposes. For example, one for food shopping, one for bills and another for saving. This organisation and compartmentalisation helps in staying on top of everything. Also, I've found that setting all your bills to be paid on the same day helps in getting through the month smoothly. Have them a few days after you are paid. You cater to them at once and don't have to worry if there is enough in the account through the month. It's like eating the proverbial frog. This technique also prevents you from spending money that is intended for bills, causing you to default on them.

One final tip is to think long-term before any big purchases. Think extensivley about how they would affect your situation and if they are aligned with your long-term goals. Be aware of falling for consumerism and marketing traps used by companies to take your money from you. They spend millions on this to make it seamless, you've got to stay switched on!

Increased Income

Increasing income is by far the best way of improving your financial position. There are a few ways you could go about this. But it must be said, as your income increases your lifestyle and spending must not also inflate else the benefits of the larger income are negated.

Asking for a raise at work is a good place to start. The extra monies can be sent directly to the savings account. Similar to this is changing jobs, you can often negotiate a higher salary.

Picking up a second job on the weekends or in the evenings is an opportunity for those who believe rest is for the dead. Imagine using one income to cover bills and the other is for splurging.... I mean saving 😅. Options include: Uber/Taxi, delivery jobs, babysitting etc.

Starting a side hustle can be of benefit financially as well as being quite rewarding. Leverage any skills or hobbies you may have to turn a profit. Knitting, singing, car detailing or even reselling items all fall into this category. Scaling your side hustle could even allow you to leave a job you hate.

Building a business is daunting, but a large successful business has a larger return on investment than any other medium. Entrepreneurship comes with its risks and liabilities however. It may not be for everyone.

If you have a bit of capital already, investments are definitely a good way to grow your money. It is out of the scope of this topic, but link to the Investment segment to get an insight.

Financial Freedom

Money may mean different things to different people. It can be purely a resource, an instrument to attain financial freedom. Once you are free of the financial burden of needing to make it, you can chase things you are more passionate about.

Having money isn't everything, it can only solve your money problems. You would have to develop yourself and grow in order to address some of your other life worries. It is a constant development journey. Attaining a wealth of knowledge is just as important as gaining financial wealth. Also being generous is a key part of the journey. Whether it be sharing your knowledge or being charitable and helping those with less.

There's no use in holding onto money forever.

Not only Superheroes save!¡