It’s the last day of the pure personal finance week, but rest assured we’ll be coming back to various money issues throughout the month, so keep up that spending diary and keep putting small change into that jar. Today we’re looking at bigger savings and making plans for them.
I think it’s fair to say that most of us would like to be saving for something, if we aren’t already. But first things first – are you in debt (apart from mortgages and student loans)? If you have other debts it’s usually more efficient to start paying off the debts instead, ideally as quickly as possible, and perhaps also after switching them to lower-interest borrowing deals.
Generally speaking, you’re far better off in the long run if you use any instant access savings to pay off debts. That’s because the interest you’re likely to earn on savings is very low compared with the interest you’ll have to pay out on the debts. So, if you have savings and debts, today consider using some of the savings to pay off some of the debts.
If you don’t have growing or static debts then you can consider starting or adding to your savings today. What would be most important to you? For example, it could be one of the following:
- Starting or adding to an emergency fund
- Saving up for a short or medium term goal (holiday, Christmas fund, car, house deposit)
- Saving up for a longer term goal (investments, savings for kids, retirement)
Realistically, how much will you need to save? Next, ask yourself how much you can spare each month, and for how long? Can you earn or free up some extra cash to go towards this?
Then work out how long it’s likely to take you to save up. Also, note if there’s a deadline of some sort.
For example, I’m hoping to have a proper holiday this year, maybe in the early Autumn. I’ll be shopping around for the best deal, but think I’ll probably need to save about £500 in total for flights, hotels and other tickets. My plan is to save £70 per month between February and August, which should give me £490. I’ll also do some selling, probably on eBay, to raise the rest plus some spending money.
So that’s my plan. Nice, simple, specific and achievable. What’s yours?