SOME OF US are just not built to save. Just like there are morning people and evening people, there are saving people and spending people in the world.
That said, anyone who has ever successfully built up a substantial nest egg – for a mortgage or otherwise – will tell you that the key to getting a large lump sum together is regular, structured saving.
So how do you start saving if you’re generally living on a fiver in the week before payday?
Forming a solid savings habit and getting into a good groove is easier said than done, we know – so we went to some of Ireland’s financial brains for advice. Here’s what they told us…
You have a life to live, and it’s unrealistic to think you’ll be able to cut out every single extra or splurge while trying to get that house deposit together. But what you can do is pick your treat purchases, and budget them in.
“One thing I’ve noticed, from poor to rich clients alike, is that we all underestimate our total monthly or annual expenses,” says says Fonz Scanlan, a certified financial planner with Money Smart.
We splurge on a big item and justify it by calling it an exception. The problem is that we don’t include these ‘exceptions’ in our budgeting, so they mount up. Budget for splurges and cut them out if they’re damaging your savings plans.
There’s a difference between not spending money on something and physically putting that money away for saving, says Paddy Delaney, creator of the Irish financial planning blog and podcast Informed Decisions:
If you’ve just refrained from buying that new item of clothing or those concert tickets, immediately transfer the equivalent value from your current account into your savings account. You’d be surprised how quickly this can have an impact.
So the next time you don’t go see Ed Sheeran perform live, give yourself 50 quid for the savings account. Seems like a more judicious use of the money regardless…
Savings accounts don’t come knocking on your door or putting bills in your letterbox, so they’re easy to ignore. Make your savings as an essential expenditure, and you’ll start to think differently, says Fonz:
I tell my clients to think of savings contributions as they think of utility bills – a necessity of modern living.
Even if they’re finding it tough – or impossible – Fonz urges his clients to “keep trying because it’s so important to their future wellbeing to have a savings reserve”.
Another key element? Pay yourself first. Savings come out top of the pile, every time. It’s not an optional extra after everything else gets done, so stop mentally framing it that way.
“Anything you can do to put money out of arms’ reach will increase your chances of building up your savings and them remaining untouched,” says Paddy.
Fonz agrees, and advises automating the process so you don’t even need to think about it, whether you’re saving €10 or €1000 a month. The best way to save is to set up a standing order to a deposit account.
This creates a savings habit and will make you much less likely to reduce or stop monthly contributions.
Not to harp on here, but like we said – it really is about forming good habits.
Everyone loves a quick fix, whether it’s a pre-holiday juice cleanse or a pledge to save €1000 in a month.
Many savers advocate for ‘no spend days’, where you choose a day or two each week to spend nothing. But just like a fad diet, this probably isn’t going to result in long-term change, warns Paddy.
“Some people can and do benefit from this type of approach while others find it too restrictive and end up spending more than they would have if they were spending normally.” So what’s his solution?
The traditional method of spending less than you earn – and saving the difference – requires hard work over a period of time, but it’s an approach that works for most of us.
It’s head-wrecking but true what they say: the simplest solution is often the best.
The whole process will be easier if you know that someone is in the same boat that you are. That might be your partner, a friend or even a work colleague who is in savings mode too.
Buddy up. You’ll have someone to share sober nights in with, moan about all the holidays you’re not going on and furiously WhatsApp when you’re having moments of weak resolve while browsing ASOS.
And above all, don’t lose motivation, says Paddy:
You may indeed want your new home right this second, but if you take time to create a realistic plan for yourself, you will be well on the road to getting there.
When you’re making the decision to sell up or renovate, everyone will have their opinion – and won’t think twice about letting you know what it is. But how do you block out the noise and get to the point?
At permanent tsb, we value finding a better way. If you’re house-hunting, or even just saving for your deposit, you’ll want to do things the right way. Head over to our Bring It Home Hub for the inside scoop.
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