A few years ago I made the bold move to leave the nest and start renting a flat with a friend of mine. Eventually I’d like to get a place of my own, but after my rent and other bills for the month have come out there isn’t a lot left to put aside. It’s all made worse of course by the parental questioning every time you retreat home for a free dinner of, “How are you doing for money?” It’s an important issue of course, and if you get defensive it’s only because their questioning hits home the nagging guilt that you’re spending too much on Playstation games and trainers. However, there is hope for us all if we just learn to change some of those bad spending habits!
Here’s how I got on track towards what will one day become the biggest purchase of my young life:
Daily spending habits
First things first, trim the fat. We all have expenses we could probably do without. Get that bank statement out of whichever drawer you hide it in and take a look. Got a subscription to a magazine you don’t even read? Cut it. Get healthy snacks delivered to your door you don’t eat? Cut it.
Check out your daily and weekly expenses too. You might be surprised about how much you spend on lunch every day if you eat out. My own personal vice was smoking, cutting that out completely has given me an extra £40 to save every month. Drop the frivolous expenses you have each month and you will begin to notice that little bit more cash left in your bank balance at the end of it.
Break the shopping habit
There is something to be said for retail therapy. Shopping really does make you feel good. You can sometimes have too much of a good thing however, and if you constantly want to be seen in the latest styles you will begin to find it to be a drain on your finances. Try instead moving to a ‘capsule wardrobe’. It’s a simple idea really, get rid of everything in your wardrobe that you don’t love, and create a three-month wardrobe consisting of 37 pieces or less. When those three months are up, rotate seasonally inappropriate clothing out and bring a few new items in. You can’t shop during those three months, and if you’ve got a talent for putting an outfit together you could find yourself saving money this way.
One simple rule that I try to stick to is the 50/30/20 rule. It is a guideline for setting up the optimal income allocation based on percentages: 50% of your income would go to mandatory bills (rent, phone, car insurance, student loans), 30% would be fun money (movies, food, vacations), and 20% would be savings. This only works if you start with your rent, though. All of your recurring monthly bills should not exceed half your take-home pay, meaning that your rent should sit somewhere around 30%. If yours is way higher right now, don’t worry – that’s true for many young renters. If you can move to a safe area at a reduced rent next year, however, it’s certainly something to consider.
The savings account
After I started to curb some of my worse spending habits I started to put what I had left over each month into a savings account. There are plenty out there to choose from, but as I have made the commitment to save for my first home I chose a Help to Buy: ISA. A lot of the high street banks are offering Help to Buy: ISAs right now, and there’s very little between them. Essentially it is a government backed scheme to help first time buyers like myself into a new home. The government boost your total savings by 25%, so for every £200 you save, you receive a government bonus of £50. Through this process I’ve also always kept an eye on my handy mortgage calculator as well, if only to work out how much I’d need for my dream home.
Outlined here are just a few tips and tricks that I’ve found to work and get my savings in order. There are plenty more out there, it just depends on what works best for you. Happy saving!