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Wednesday 9th March 2022
What's it all about?
This article's designed to help you:
When you commit to saving, you’re making a potentially critical investment on your own future, so starting young makes sense. Your early decades are a great time to get to grips with things like pension planning and basic budgeting. The trouble is, this isn’t usually the kind of thing they dig deeply into at school. Most of us are pretty much left to educate ourselves on simple money management. When you’re 21, pensions can seem like such a non-issue that they’re hardly worth learning about – much less paying into. However, having even just a rough idea of how the system works can be a major leg-up when you start working and building up a pension of your own.
So how do you kick-start some good savings habits? Well, the first thing to do is open up a spreadsheet. Don’t worry – that’s about as scary as this is going to get. We’re not expecting you to become an instant financial expert. Just open your sheet and start recording what you earn each month in it. When you spend money, make a note of that too. Pretty soon, you’ll have the makings of your first real budget plan laid out.
Remember that the small details matter. Every amount you’ve spent, no matter how small, goes into your spreadsheet.
Remember to record what it was you spent it on, too. You’ll quickly get a clear picture of where all your cash is going – and that’ll be important when you start to plan your saving.
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Obviously enough, diving straight into paid work out of school can give you a bit of a leg-up on the savings front. If you can keep on living with your parents for a while, that advantage gets magnified since you probably won’t be hit so hard by “overhead” costs like rent and bills. In turn, that should give you more disposable income – and with it, more headroom to save money. Even so, you’re still going to need to get into those good saving habits if you’re hoping to make the most of your financial head-start.
We mention the “50/30/20 rule” quite often in these articles, and there’s a good reason for that. If you’re trying to save money in a simple and reliable way, then making good budgets is the key. If you haven’t already read our article, “4 Fixed Income Saving Strategies - Combine to Win!” then here are the basics. Divide up your income into essentials (50%), wants (30%) and savings or debt repayments (20%). Simple, right? Just stick to that and you’ll be well on your way to hitting your first savings goals.
Saving strategies for fixed incomes
Let’s look at some actual numbers next. An average 18-21 year-old in the UK earns £18,392 (for men) or £17,005 (for women). So, if we take the average of those, we get £17,698. Obviously, you’ve got your Personal Allowance and taxes to factor in as well.
The figures of the 50/30/20 system break it down like this:
Naturally enough, if you’re paying your own way for living expenses then your actual costs will probably look very different from someone still living at home. The same goes for people paying their own travel costs rather than getting lifts from Mum and Dad. It might turn out that your essential living expenses eat up less than the 50% of your take-home you’ve allocated to them, allowing you to save more. Either way, planning where each chunk of your income’s going is the core of good budgeting.
Keep checking back here for more money tips and updates. We’re experts at saving you cash and we’re always here to help. That’s the reason why you’re better off with RIFT.
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