Whether preparing for a rainy day or something special like a sunny holiday, a savings habit does more than keep us out of debt and it’s not as hard as it might seem…
“I had been in debt for ages on credit cards. I had to go bankrupt. Then one member of my family got very ill, my mum and my partner were diagnosed with cancer, and I found out I had an immune system disorder.”
Quids in! reader Becky has been telling us how her money worries showed no mercy when illness struck at the heart of her family. She is now a survivor and believes her decision to conquer her finances has made a big difference to her wellbeing.
WHILE THE SUN SHINES
The holiday ads are hitting our screens but millions of people are still paying off the Christmas cash hangover, it may sound crazy, but it’s time to be thinking ahead and creating a war-chest to plunder so the good times aren’t tainted by crippling debt.
Good habits like saving ahead mean happier holidays and less strife when life throws us a curve-ball, like flood damage or car breakdown.
Becky explains that it can be daunting to start: “I had to change my mind set. I wanted to be able to help my children and take time off if I needed to go and nurse anyone.”
“The truth is that on paper, I didn’t have enough money to start saving. So I decided to save first and then stretch everything else out. I started using all the leftovers, getting creative in the kitchen and shopping less often.”
“I set a goal of £1,000. I checked on moneysavingexpert.com and looked at gas and electric companies. I found I could get a cheaper rate without even switching my supplier and £150 cash back. I looked at where I had been charged for electricity for work men in my house and asked for the whole amount from my housing association… I was pretty shocked when they gave it to me!
“It turned out I’d overpaid my water bill and got a surprise cheque in the post. It was like the flow had turned the other way.
“I opened a credit union account that you could only get money out if you gave notice, so no impulse buys.
“I remember the day when I got my first £1,000 I actually did a bit of a victory song and dance. I called the credit union and got them to tell me what I had in the bank so I could hear it.”
Research by debt charity StepChange found savings of £1,000 would stop half a million people turning to borrowing they cannot afford in an emergency. They say 13 million people would fall behind with bills in a month if their income dropped by a quarter.
A savings habit is not just about being able to weather the rainy days and coping with domestic disasters. The fun stuff, like Christmas and holidays, are more enjoyable when debt free and paid for in advance by some sensible saving through the year.
Taking a holiday can feel like pie in the sky for many, but the Money Advice Service has some great advice. Firstly, they point out that if you’ve saved the money but have a credit card, put it on the plastic because you’ll be more insured if things go wrong – just make sure you pay it straight back in full. Set a budget including everything from travel and somewhere to stay, to sun cream and a daily spending allowance. Then work back from there. See how much you need to save each week and for how long.
Think it’s not achievable? Follow Becky’s example and just get started. Stick your favourite holiday photo to the fridge to remind you to stay strong.
Name your goal
Think about all you’ll need for your target. For Christmas, think food and booze and gifts, just don’t go overboard. For holidays, beyond the cost of travel and somewhere to stay, remember the kit you’ll wear and a daily allowance for food, drink and the fun stuff. Be realistic and if it looks a lot, cut it back. Name your fund and you won’t want to let it down.
Just do it
Start right away. Save a little and often and, so you know if you’re falling behind, divide your target by the number of weeks before you’ll need the money and get tough on yourself – don’t skip a week. Put the money somewhere safe, be that a jar or bank account (preferably one that pays you interest – check out comparison websites to find the best).
Give it a boost
On top of your weekly sum, top up the savings with any little extras that come your way. Maybe you get a rebate from your gas supplier or sell your old CDs. If you didn’t expect it, you won’t miss it.
Once you see the savings grow, you’ll find it addictive. After a couple of weeks, count it up and pat yourself on the back. Maybe you could do more? There are a couple of warnings: Firstly, don’t dip into your hard won savings. But if you’re in debt elsewhere, and you’re paying interest, then the money in your savings will do you more good settling debts.