Saving on a Low Income

Savings are the cornerstone of financial security at any level. We all know that it’s something we should be doing, so why do so few people manage it?

When you’re living paycheque to paycheque, as many people are in the current economic climate, it becomes a daunting task to set aside any money for the future. The primary concern is to meet the rent and bills now rather than worry about hypothetical costs further down the line and this perfectly natural. This doesn’t mean that it’s impossible to start saving, just that it requires discipline.

So what are the key points to start saving for the future?

Firstly, start small. If you don’t think that you can afford anything then start very small.

Put away £1 a week if necessary, 10 pence, whatever you can afford. Make sure that you do this regularly, have a set time every week so that you don’t forget. In fact, the easiest way to do this is to set up a regular transfer from your account to a savings account. If you set the transfer to go through on the same day as your payday then the money will go straight out to your savings, it won’t be in your account long enough for you to notice that it’s gone!

Secondly, start today. Don’t plan to start next week, next month or next year, start now. Every day that goes by your savings will increase, every day that you don’t is a missed opportunity.

Another crucial point is very simple. Don’t touch the savings! Towards the end of the month you may be tempted to take money out of your savings to see you through until payday, often with the intention of paying the extra back in. Don’t. You’ll have to pay a little more in to your savings just to get back to where you were, so you’ll be more likely to do the same the next month, and the next month. It’s an easy cycle to get into and a difficult one to get out of so avoid this trap in the first place.

However, you do need to establish what your savings are for. Are you saving for retirement, a new car or just to have some emergency money? What establishes an emergency? Set yourself boundaries and stick to them!

I’ve found it helpful to have to separate savings accounts, one for long-term, one for an emergency fund. The long-term savings I do not touch under any circumstances, that will eventually be a deposit on a house, or even a retirement fund. The emergency fund is different, this covers expenses that aren’t covered in my monthly budget, but only emergency expenses.

For example, if the MOT is due on my car, then this is budgeted for and paid for out of my regular account. However, if my car breaks down and costs £200 to get back on the road, then this is an emergency payment from my savings. I need the car working and cannot afford to take that hit to my monthly budget.

Using the same example, it shows how important savings are. If I didn’t have that backup in place then that would have to come out of my monthly budget and leave me short on everything else for a month. This could leave me with no money for petrol, food or even rent. Having that backup, however small it is, can make the world of difference when the situation gets difficult.

A lot of keeping control of finances is about forming the right behavioural habits and this is no exception. You’ll feel the difference in your budget initially, but after a few months it’s unnoticeable. You grow accustomed to living off slightly less money, meanwhile your savings can just grow and grow.

Easy Ways To Regain Control Over Your Finances

Money and the absence of it is one of the most common sources of fear in the world. If you learn how to eliminate the anxiety that finances cause, you can start acquiring more of this all-important resources. It is far better to gain control over your finances than it is to let your finances control your life.

Start by creating a budget and diligently adhering to it. Although most people are well aware of the benefits of budgeting, few people actually take the time to write one. Knowledge is what you know, but wisdom is how you use what you know to benefit and improve your life. Put this knowledge into action and start budgeting today.

Stop spending money on things that you really don’t need with the intention of rewarding yourself. This is especially true of big ticket items that won’t provide the same lasting satisfaction and peace of mind that savings will. Write a reasonable sum into your budget for treating yourself on a regular basis and stock all your overages away. Savings are infinitely more valuable than tangible assets when financial problems arise.

Consider your risk tolerance and remain cognizant of this in everything you do. Your risk tolerance basically defines the amount of risk that you are capable of handling at any one time. If you take on too much financial risk, you will be more prone to irrational and hasty decision-making.

There are lots of ways that you can take on too much risk. For instance, if you choose to finance a home or purchase a car before you’re actually ready for these purchase, this will create an excess amount of risk. The end result will be anxiety and stress and a tendency to make choices that aren’t in line with your financial well-being or your financial goals.

Establish a mindset of gratitude, no matter where your life might currently be. If you make a point of being happy with what you already have, you won’t be as likely to overspend on new things that you really don’t want or need. More importantly, you also be more predisposed to taking good care of the resources your currently own. This will extend the lifetime of these assets and help you get more value from them.

Start making a proactive plan to take care of your existing debt. Reach out to your creditors and attempt to establish reasonable payment plans that you can actually adhere to. If this doesn’t work, think about getting a debt strengthening loan in order to centralize your payments and make everything easier to manage.

If you’re being pursued by a debt collection service, make a point to connect with the company to discuss your accounts. Find out how much you owe altogether and determine whether or not your can feasibly repay your debts. If you have acquired more delinquent accounts that you can reasonably manage, it may even be a good idea to consult with a bankruptcy attorney. Efforts like these are a proactive way to start bringing your finances into a more manageable and profitable state.

Steps to Open a Savings Account

Anyone with financial goals also needs methods for achieving them. A savings account can be one way to build a nest egg for the future. When you wish to begin this type of relationship with a bank, you will need to follow prescribed guidelines for becoming a customer.

Research Options

Different financial institutions have specific policies and guidelines for their services. Before opening a savings account with any one bank, gather information from several to enable you to compare. Optimally, the facility you select will have a convenient location, possibly with more than one branch. Also, look for a lender with hours that match your schedule, an extensive ATM network, and attractive features such as online banking. Find out about minimum balances and fees to help you choose the institution that offers the best package to fit your needs.

Gathering Materials

After choosing the bank you want to use, gather the documents you will need to open the savings account. Most financial institutions require at least one form of identification (possibly two) and proof of address. Acceptable forms of identification include a driver’s license, passport, school identification card, voter ID card, or government-issued photo identity card. Acceptable types of proof of address include a bill from a utility service, a registration letter for the connection of a utility service, or a rental lease. You will also need to know your Social Security number, so bring your card if you have not memorized this number. Minors will need a parent or responsible adult to accompany them to the bank to open a joint account in both the minor’s name and the adult’s name. Bring the cash along that you wish to deposit, also.

The Process

You will meet with a representative to open the savings account. The representative will present the options you have for different terms and packages, and you will need to choose the one you wish to use. Ask specific questions about fees, service charges, interest, minimum balances, and statements at this time. Take notes, if necessary. If online banking is available, arrange this service at this time. You will likely need to choose a username and password to access the bank’s online portal. Review terms of online services, also. Request an ATM card to be connected to the account, if desired. Review all terms to ensure you understand them. Sign the contracts to indicate your understanding and agreement. Give the representative the cash to be deposited. You will receive a receipt to show this transaction. You will also receive a book that displays deposits, withdrawals, and balances.

To maintain the account effectively, stay up-to-date on your balance. Add all deposits and subtract all withdrawals to ensure you know the balance. When the bank adds interest or subtracts fees, add or subtract these amounts to or from the balance to get an updated balance.

With proper preparation and ongoing maintenance, a savings account can be an effective way to manage money in both the short and long term.