‘We saved for our first home’: Saving is rarely easy, but for millions of households the last year has been the exception to the rule
Saving is rarely easy. It tends to be a relentless slog of abstemiousness, planning ahead and willpower. But for millions of households the last year has been the exception to the rule.
For many who have kept hold of their incomes, the extra pounds of surplus cash have been effortlessly piling up with fewer outlets for spending available. Households have managed to build up £180billion in extra savings this year.
Of course, once lockdown ends we’ll want to go out, spend and enjoy some of the things we’ve so missed. But now we’ve got into better savings habits, how can we maintain them for the long term? We asked the experts for their tips.
Focus: Holly and Nathan Sheehan with their daughters Remi and Kaci
WE SAVED FOR FIRST HOME
Life used to be jampacked full of activities, days and meals out for Holly Sheehan and her young family. But over the past year they have had to be more inventive to stay entertained. Yet they have managed to save a deposit for their first home that they will move into in June.
Holly, a 30-year-old school administrator, lives in Somerset with husband Nathan and daughters Remi, six, and Kaci, four. She says: ‘As parents we used to put so much pressure on ourselves to keep the kids entertained. Since lockdown, we’ve enjoyed slowing down, going for walks, cooking and spending time together. We’ve made some great memories, but we’ve also saved enough to help buy our first home.’
Holly is confident she and Nathan will continue to save. ‘We’re now saving towards taking the kids to Disney World in Florida,’ she says.
Think about what you have really missed
Before reverting to old habits, think about what you’ve missed this past year and what you haven’t given a second thought to. That should give you some ideas for where you could cut back without it hurting.
Jasmine Birtles, a finance expert and founder of website MoneyMagpie, says: ‘I really haven’t missed many things I used to think were essential, like getting my hair blow-dried each week at the hairdressers and going out to local restaurants for dinner a couple of times a week. I’m looking forward to doing those things again, but not nearly so frequently.’
Tweak old habits and find cheaper new ones
Many of us can’t wait to get back to old social habits, such as a regular meal out with family or meeting friends at the pub. These are probably among the last things we would want to cut back on – even if it would mean saving money.
Stacey Lowman, of digital financial coaching app Claro, believes there may be an easy compromise. ‘Have a conversation with the people you spend money with and see if that is something you both want to continue to do or whether there is a cheaper or free alternative you would be just as happy with.’
For example, if you normally go for lunch, could you go for a walk instead? Or perhaps you could take it in turns to make dinner instead of going out. By having a conversation you may find you’ve been doing things out of habit rather than choice. Lowman says you may realise that your friends and family also want to rein in their spending.
Set a budget for the end of lockdown
Saving is easy when there is no temptation, but as soon as lockdown ends it’s likely to get tougher – especially if there’s money in the bank. Lowman recommends setting a post-lockdown spending budget.
She explains: ‘The Chancellor has called on people to help kickstart the economy by spending some of their lockdown savings. But by setting a budget you ensure you only spend what you’re happy to. You won’t feel guilty spending money you’ve allocated for having fun.’
Kash Amini, founder of financial and wellness app Maslife, says: ‘Financial goals help you to track your progress and celebrate any financial milestones you have reached. Goals also help you stay focused and avoid slip-ups. It is also important to keep each goal to a dedicated timeline, as this will make it easier to hold yourself accountable.’
Lowman adds it is essential to make goals realistic. ‘Set an achievable target, for example to save 50 per cent of what you did during lockdown.’
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Lay the groundwork for your savings now
A bit of planning now can make it easier to save later on, says Jonathan Watts-Lay, director of financial education provider Wealth at Work. He says: ‘Consider setting up a monthly direct debit into an Isa now for the amount you want to save. Behavioural research suggests that once we’ve automated things we are far less likely to change them in the future.’
If you receive a weekly or monthly income, break it down into what you earn per hour. With that number in mind, you may be less tempted to fritter away cash, says Adam Bullock, director of cashback website TopCashback.
He adds: ‘It’s easy not to give much thought to small transactions, whether it’s £20 on toiletries or a tenner on lunch. But if you work out what things cost in the hours you will have to work to pay for them, it might make you think twice before buying.’
Take a step back…and think long term
Many of us live from pay day to pay day and struggle to look further ahead. Lockdown has given some people a rare opportunity to step away from this monthly mind set and think longer term.
Lowman recommends taking full advantage. ‘Take some time to think about your bigger financial plan,’ she says.
‘Some people may have realised during lockdown that they want to change career or move home. Think about what you want to do and think about how best to financially prepare for it.’
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