If you’re having trouble saving money, even though you have scaled back on shopping, you might be making a few mistakes. To help you get more money in the bank to use for your future and provide a sense of family security, the tips below might be useful. This guide is designed to help you save your money for different scenarios. It can be hard to feel comfortable financially before you’ve even considered what you would need them for.
Here are some of the most common scenarios and how you can navigate saving for them.
1. Wiping your debt
Debt is infuriating. It is the first on this list because it gets in the way of everything else.
Whether you have been spending money using credit cards to build your credit score, pay tuition for college, or handle bills if you get ill without insurance, debt can seem to follow you around everywhere.
It gets in the way of buying a car, buying a home, and even saving money in general. That minimum monthly credit card payment could be going into your savings account every month instead, then imagine how much you’d have saved up.
Plus, there is the interest to think of. The longer you take to wipe your debt, the more the interest will pile up. Therefore, it is in your best interest to get rid of it as soon as possible.
As counterproductive as this is going to sound, start paying more. Take a look at your budget and start paying more than the monthly minimum, as much as you can comfortably afford to get the debt out of your account as soon as possible. And in the meantime, you can watch your credit score go up.
If that isn’t getting you very far, consider consolidating all your debt with a balance transfer card so that you can bypass the interest rate for a period of time. Or you can look into refinancing an auto loan to wipe it out entirely.
2. Save your money for retirement
Retirement may seem like a long way off, but it’s something you have to think about throughout your life. If your company doesn’t have an opt-out policy on pension schemes or you’re not signed up for one, look into it.
You can ask your employer for a company pension scheme. If there isn’t one available, open your own private pension as soon as possible. The sooner you start saving, the better.
Tally’s guide to how much you need to save to retire comfortably outlines how much you will need to save and how long it will take to get there. According to Tally, experts recommend saving between $1 and $1.5 million to keep you feeling comfortable throughout your retirement. A good rule of thumb to follow is to aim for about 80% of your yearly income and then use the 4.5% annual withdrawal rule to calculate the total savings you need.
There is also your social security, your mortgage, and your monthly expenses to think of before you even consider just how long you expect to live. It’s an uncomfortable conversation to have but it will need to be had to determine just how much you will need money-wise to last the rest of your life.
3. Save your money for a mortgage
With the housing market the way it is, it can seem impossible to get on the property ladder. It’s not impossible, but it will take some dedicated savings for that house deposit.
Thankfully, there are ways you can boost your borrowing power and therefore get a loan for a more valuable home. Like everything else in finance, the more you pay upfront, the less you will pay down the line. You can make your mortgage a lot easier to handle if you can come up with more for the downpayment.
The minimum for a deposit is 10%, but if you go as far as 20% you will also be able to forgo the Private Mortgage Insurance designed to protect the lender if you were to stop paying your mortgage (in the US). Without the 20%, the Private Mortgage Insurance will be added to your monthly repayments.
But to get to that 20% you are going to have to save a lot. The best tip for that is to start now. Even if it’s far in the future, start now.
Put away anything spare you have. Set up a standing order every month so that it feels like it is simply coming out with your utilities, and you don’t even notice.
It’s a drastic idea too but consider moving. Take a look at the homes in your area. We all know how greedy landlords can be, so are there similar homes for less rent? Can you downsize for the time being? A couple of years in a smaller home could see you putting that rent towards a bigger home down the line.