Saving money is the foundation of financial success. It’s important because, quite frankly, no one can predict the future. Saving money helps us become financially secure and provides a safety net in case of emergency, whether you work for yourself as a freelancer or for another company.
As we enter 2019 with the likes of Brexit looming ever closer, it is difficult to predict what will happen next. This is a great time to get your finances in order and start setting and achieving your savings goals.
Below accountancy firm Pulse Accounting share their top tips for saving in 2019.
Develop a Savings Plan
The first step to developing a savings plan is to establish your current spending patterns. To do this:
- Look back through your bank statements with a fine-tooth comb – going back around 6 months or so
- Note down your total income and total outgoings for each month
- By subtracting your total outgoings from your total income, you will be left with a figure which represents the sum of money you have left over at the end of the month
- From this you can calculate a monthly average
This process helps you set a budget for how much you can feasibly save each month.
If you earn £2,000 in net monthly income and have £600 left over on average each month, you are well on track to saving a healthy figure in 2019. If you are only left with £50, however, you need to tighten the purse strings and review your spending habits and/ or look into increasing your regular income.
When analysing your statements, highlight areas in which your spending can be cut down and reined in.
Set your savings goals
Having taken stock of your current spending habits and outlined costs that you will cut, start setting your short and long-term savings goals:
- Short-term goals: perhaps you are saving up for a new car. You want to make the purchase in 6 months. You need save £2,500, meaning you will need to set aside just over £400 a month.
- Long-term goals: money that goes towards your long-term savings for the future. It is suggested that you save between 10-20% of your monthly income. If you net income is £2,000 per month, putting between £200-400 aside is a healthy amount.
For the self-employed, contractors and freelancers things are a little different. We suggest that this group live off 50% of their income. Of the remaining 50% we suggest saving between 10-20% of this amount, leaving 30% left for tax bills, National Insurance payments and pension contributions.
This group may consider hiring an accountant who can help with tricky tax calculations.
Here are tips to help you save in 2019
Having established your savings goals, it’s time to make them happen.
Many of us find saving tricky, but there are certain tactics and techniques you can apply to your everyday spending that will make a big difference.
Cut down on unnecessary spending
Having looked closely at your outgoings it is likely that you will have pinpointed expenses you can cut down on.
Perhaps you are still paying for a monthly subscription you no longer use, or you might notice that the price of that cup of coffee you buy on your way to work every day really adds up.
Cutting these small costs makes a big difference. After all, spending £3 on a coffee each day will cost you approximately 3 weeks of working granting you earn £30,000 a year.
- Try out Money Saving Expert’s Demotivator tool which highlights how much you could be saving by getting rid of unnecessary costs.
- Consider everyday costs such as lunch. Us Brits spend around £1,580 in an average year on lunch alone – that’s a significant sum that could be sitting in your savings account instead.
- Be frugal – are there branded products you purchase regularly that could be swapped out for own-brand products?
- Become more mindful about your shopping habits – do you shop when you are under pressure as a reaction to stress?
Shop Around for the best deals
It’s always best to shop around. Taking the time to do a little research can save you a lot of hard-earned cash plus having space and time between the desire to go for that purchase might make you reconsider it all together.
Before making big purchases, like a new phone or computer, do a little digging.
Sites such as Google Shopping are easy to use tools for comparing the best prices out there.
You will also find useful online forums such as HotUKDeals where members post the hottest deals to be found on the web at that time. Search specific brands or products and see if you could be making a big saving.
Finally, use comparison sites to see if you are receiving the best deals on your bills and insurance. Many of us are surprised at how much we could be saving. These tools are quick and easy to use and will highlight whether you could be paying less than you currently are.
Keep on top of expenses
This is critical for the self-employed, contractors and freelancers. There are certain, legitimate business expenses these workers can claim back and offset against their tax bill.
Keep a close and accurate record of all expenses to ensure you are saving as much of your hard-earned income as possible.
Invest your money – make the most of your savings
Being savvy with your savings can really pay off.
It’s always a good idea to invest your money into a savings account which pays interest. Even if interest rates are relatively low, it is always worth gaining the small amount of interest over none at all.
If you have the means, there are also other types of account you can begin to invest in:
- ISA accounts can be a great financial tool. In 2017 the Government launched the Lifetime ISA (LISA) under which any first-time home buyer between the ages of 18-39 can save up to £4,000 a year, to which the government will add a tax free 25% bonus. Save the maximum of £4,000 and you will receive £1,000 on top of this.
- A cash ISA is a savings account on which interest is not taxed. Anyone aged over 16 can invest up to £20,000 each year and once your money is in, it stays tax free.
To get on a good financial footing for 2019 remember to set your savings goals within your means, be savvy with your spending, and shop around. These small changes to your everyday will soon add up.