Savings sound like a great idea, don’t they? We’d all love to have some money set by for the finer things in life. We all deserve a holiday after all! In truth, savings are important not only for the positives but for the negatives. Sometimes bills creep up out of nowhere and we find ourselves crippled financially – any car owner can commiserate!
Short term savings are important to develop and like other things in life it’s a habit you train just like a muscle. The good news is that short term saving is a little more straightforward than investing money for the distant future and anyone can get started quickly and see some great returns coming in over the course of as little as a few months. Here’s how.
Start with the income
The most sensible way to get a gauge on your potential savings is to start with identifying clearly what’s coming in. In some cases this is more than just a salary – other jobs and sources of incremental income are just as important as the big pay check coming in at the end of each month.
Once you’ve got a solid figure you can get started on the next important step.
Expenses – measure them
You can’t get away from this one, as unpleasant as it may be! Once you know how much is coming in you need to be aware of what’s going out. The difficulty most have here is in locking down all their costs; many people miss out the small recurring payments that are so crucial to being clear with your finances. Small details like buying coffee a few times a week on your morning commute become gargantuan costs over time. If you’re buying a £3 latte three times a week that quickly becomes an annual expense of £432!
The best way to make this simple is sit down with a notepad or computer and make a list. It helps to have your online banking open while you do this so that you can take a close look at your statement and try to see any patterns or payments you might have missed had you gone from your head instead.
It can be a little bit gruesome for some and is always a wakeup call, but it’s a great feeling at the end to know exactly how much you are spending and where you are spending it. There are a lot of tools out there that can help make the task easier.
Savings comes down to routine. You stick to a plan and receive small boosts of satisfaction once you know a day, a week or a month has been well executed. Once you get this step out of the way, relax! Congratulate yourself for a job well done. Saving shouldn’t always be a chore.
A common mistake for savings is thinking you’ll know down to the penny the expenses you’ll face in future. Saving is fantastic – anything is a step beyond nothing. What you need to do, however, is make sure that you have sufficient padding for life’s many unexpected surprises. Particularly if you have significant monthly expenses such as a car or payments for your house, you’ll need to make sure you are covered.
A common statement when it comes to short term savings is that you should have enough saved for three months living without income. This seems like a huge amount, but it’s a great goal to strive for. Most of us are lucky to have job security and won’t likely be in a position where it will be needed, but you never know. Should the worst come to pass you’ll be well suited to weather the storm and re-establish your financial security.
Be realistic with yourself
There’s nothing worse than getting distressed over savings. A practice that can help make your life better can easily become toxic if you allow yourself to feel bad about what you can and can’t accomplish.
A positive mental attitude is a great asset when it comes to planning your short term saving goals properly. You’re doing this for a good reason! Thinking of the future and knowing you’ll be well covered regardless of what happens is a fantastic thing to keep in mind as you go through your finances and work out what should go where.
Be careful, consistent and optimistic. Before you know it you’ll be well on the way to your financial security; it’ll feel fantastic and fulfilling once you achieve those goals.
The best of us need help sometimes
Saving for the future can be hard if you’re struggling in the present. Be sure to come and have a chat with us if you feel you need a little extra to get you stable.