Posted in: Save Money

How to Decide how much Money to Put in your Savings Account

If you want to have some savings, then you might be advised to save a bit of money each month. Being able to save regularly is a great thing to do because it means that you will be able to build up some funds which you can use to fall back on if you get unexpected expenses, save up for something good or just have as security in case you lose your job. However, it is not easy to know how much you should be saving each month.

Calculate how much money you need each month

To start with you need to work out how much money you need to spend on all of your essentials. We all have things that we have to pay out for such as tax, rent, utilities, food etc. You need to sit down with you bank statements and actually write all of this down so that you have a record. Make sure that you do not just look at one month as you need to make sure that it is typical so that you are not under or over estimating it. You may find that you have a few months that are really expensive and you will need to take this into account.

Work out what is left

Once you have worked out what you have to pay for then you will be able to work out what is left when you take this away from what you are paid. This amount of money is what you will pay on luxury items and this will include things like hobbies, holidays, gifts etc. The amount that this is will vary for everyone. Some people may have nothing left and therefore have nothing to save. Some people may have loads left. This amount may also change month to month. You will want to make sure that you calculate this for a typical month so that you can judge based on these figures. Do think about what you might do on the months where you have significantly less money though. You might feel that you should still save the same amount and just spend less on luxury items or that you should keep some money in your current account to cover that direct debit.

Decide how much to save

Obviously you will not be able to save more money than you have. However. If you have a quite a lot of money you may want to save some and keep some to pay for fun things. You will need to think about how much you want to keep to spend on fun things and how much you want to save. This could depend on whether you are saving up for a specific thing and have a deadline or whether you just want to build up some money for the future. You might want to save a larger quantity initially, so that you can get a nice chunk of money in your account. This can also work well as you are more likely to be motivated to start with and feel happy that you are spending less so that you can save a bit more. Once you have spent less for a while, you might start to want to treat yourself to a few more things or feel that you have saved enough for a while. It can be wise to always save some money though, but you could alter the amount so that you are saving a bit less and therefore have more available for other things.  Stay flexible and change it to suit your needs as they change.

Posted in: Budgeting

How to Budget

Often, we can be told that it is a good idea to budget our money. However, we have probably never been taught how to do this and there may be a lot of us that just have no idea how to set a budget. This is something that it is well worth knowing how to do, although there are different ways of doing it.

A simple way to budget

It can be a good idea to start by noting down what income you have. You will need to work out your budget so that this is the amount of money that you have available to you to spend. You cannot spend more than this, but if you spend less, you can use what is left to save, keep towards next month or pay off a loan.

Then you need to work out what you have to pay a specific amount for. This means things such as rent, loan repayments, contracts, direct debits, utilities, council tax etc. There are some things that we have to pay for and they are fixed amounts. These can all be noted down at this stage as things you have to pay out for. It is possible that you could reduce some of these costs if you switch providers which is it worth investigating, but at this stage you do not know if you can save so just note down the amounts you normally pay.  Then there will be things you pay for which are not fixed amount but you still need to buy. Things like food, fuel or transport to work, gifts etc. These are still things that you will need to buy you might be able to spend less on them. These are the things where you can start to set a spending budget. For example, if you shop at a cheaper supermarket, make food instead of buying take away, travel on a cheaper bus rather than train or taxi, drive less, only make necessary journeys etc.  

Hopefully you will still have some money left at the end of this process. You should now have enough money budgeted to cover the cost of all of your essentials. If you have some left over you can choose to buy some more things, save it or keep it towards next month.

How to make it work for you

It is important to make the budgeting work for you. For example, you may have some months which are always dearer than others. This could be because you have a car service once a year, you have birthdays to buy for, you pay an annual water bill or insurance policy or things like this. This means that you will need to think really carefully about whether you set a budget that is always the same or set one on a monthly basis, which changes every month to accommodate that extra spending. It might be that you will need to save money some months to put towards saving for future months.

You will also need to be flexible as prices will change. Prices tend to go up with time and so you will need to allow for this. It could be that you will be luckily enough to have a pay rise as well, but this may not be the case and so you will need to allow for this. If you can put some money into your savings account when you can, then this could help you out if you need it. You should also stay aware of what products you are buying that are not necessary. Then you will be able to cut back on these if you need to in order to make sure that you do not overspend. Comparing prices frequently can also be helpful as it means that you are aware of what costs more so that you can switch over to cheaper brads or suppliers so that you are not paying more than necessary.