Sometimes it's not clear where to start if you want to get your finances in order. Here are a few ideas to point you in the right direction.
As the famous Chinese proverb states. "A journey of a thousand miles begins with a single step." So it is with your savings. Even some of the best financial plans can take potentially decades to hit their goals, so the important thing is to move in the right direction.
Make It Automatic
One of the best techniques to get on track with your goals can be automatic monthly saving. The important word here is "automatic". With so much else going on, if you have to remember to save every month you may well forget. However, if saving is carried out automatically, such as with an automatic transfer (for example a direct debit), then it's a far easier plan to stick to, because you won't forget to do it, which can often happen with everything else going on.
Also, if the money is saved before you see it in your account and you can even begin to think about spending it, then that's good, as there's really no decision to make.
It may be that to hit your savings goal you need to save far more than you ever expected each month. That sort of dramatic shift can be hard to stick to, and it can be frustrating to try and ultimately fail. A better idea here is to start saving a relatively small amount, perhaps it's not exactly where you want to get to in the end, but it's something you can comfortably manage.
Then if you're successful with that, you increase your monthly savings amount in a few months. If you continue like this and increase your automatic savings rate every six months or so, then within a few years you'll be where you need to be and because you got there through a series of smaller changes it will be easier to stick to. So don't be afraid to start small, and progressively do more once you start seeing some progress. Nonetheless, the important thing is to start.
Have A Plan, Write It Down
When it comes to your finances, writing a plan down can help you stick to it. It doesn't have to be long or detailed, but a simple few sentence of what you're saving for and how you intend to do it, can be enormously valuable.
You don't have to show it to anyone, but having a plan and a clear goal means you're more likely to succeed. You could also add a few calculations of how your savings may add up over time. Looking at that may provide an extra incentive to get you on your way to saving.
The numbers below are rounded, and are just illustrative examples rather than any sort of forecast, but give you an idea of where you'd end up if you earned a steady theoretical 5% a year on your money. You can see the results of saving different amounts for different periods of time.
Examples Of Different Savings Rate And Time Horizons
|After 5 years||After 10 years||After 20 years|
|Save £100 pounds a month||£7,000||£15,000||£41,000|
|Save £300 pounds a month||£20,000||£46,000||£122,000|
|Save £1,000 pounds a month||£68,000||£154,000||£406,000|
As you can see, the results of monthly saving can add up quite quickly. The key is to get started with a plan that's achievable for you, and then if things are working as you hoped, perhaps increase your savings rate a little more. You may end up reaching your goals quicker than you think. The key thing is to start somewhere. It can become harder to reach your financial goals if you delay.