Show your money who’s boss

Updated: Apr 7, 2020

Simple tips for smarter saving and a more meaningful life experiences

Ever heard the expression, ‘pay yourself first’? – It’s believed to be one of Warren Buffet’s life advice gems. The idea is simple. The first thing you should do when you get paid is put something aside for yourself, for future you. Squirrel away something towards your nest egg. Many people will wait until the end of the month to save the leftovers. If you’re anything like me, there will be zero. In fact, it’s really tricky not to spend every last penny. This could account for the fact that a staggering 25%[1] of Brits today have no savings in the bank at all. Nil. Nada. Ziltch.

How do you start saving?

Turn your savings around with one easy habit.

You don’t need me to tell you how important it is to have some savings. For a long time I was really terrible myself, and every month left me a little deeper into my overdraft. I remember one crazy month in my early twenties when I spent £8,000 … and the rest of the year struggling to pay it back. However, since I started writing about Wealth Management, I’ve learned a few tips and tricks which turned everything around for me. It took a few months, but now I have all the savings I need and I love my investment portfolio. Here is the best advice I can share with you about how to take control and begin saving better for your future. It’s called the 50-30-20 rule.

Build up your savings with the 50 – 30 – 20 rule

A good rule of thumb is to save 20% of your money. Start by putting it into a savings account, and later you can reallocate it to a private pension or investment portfolio. 20% is manageable for most people, and over time, you’ll see some serious growth. After all, within just five months, you’ll have 100% of your monthly income in a savings account. Sounds good right?

Spend 50% on your essentials, such as rent and food. Then enjoy spending 30% on lovely things which make you happy. The 50 – 30 – 20 was pioneered by Senator Elizabeth Warren and her daughter Amelia Warren Tyagi. It’s a fantastic way to organise your finances and I couldn’t recommend it more highly.

Easy ways to put 20% of your money aside

The money advice service recommend creating a standing order for the day you get paid[2]. It’s convenient and hassle-free. As soon as your salary hits your bank, 20% goes straight into a personal savings account.

The important thing is to just keep going, don’t worry if you slip up from time to time (it’s called emergency savings right? Maybe you had an emergency). Make it a habit, and within a few months you’ll be well on your way.

How saving can make you happier

You can even make saving meaningful. Think about it, why do you spend money on stuff you don’t need? I’ve just finished my Masters in Marketing, and let me tell you some of the things I’ve learned were shocking. Adverts are not making us happy. Consumerism is crushing our planet as well as our souls. So let’s stick two fingers up to the ads and fads. There are already enough stats out there linking consumerism to depression[3]. Love her or hate her, I think Greta Thunberg is a really good example of somebody who turned her back on consumerism. She has this sense of perspective and purpose which you don’t find in more materialistic people. Spend less, and live more.

Start saving to become happier. Creating your own cuisine, making presents at home, opting for nature runs over the gym, rummaging around in a charity shop for ethical treasures…. there are so many examples of happy money-savers. You’ll probably find more meaning in things which are not purchased in a shop. We all know that you can’t buy happiness with brands and fancy things. Reduce your stress and increase your sense of true fulfilment with smarter money choices. Last year I made a decision not to buy more than eight items of clothing per year (two per season). The main reason was because of the environment and societal damage that fast fashion causes. But the side effects were extraordinary. I get genuine pleasure out of my clothes now. I think about them more, and I have rediscovered my teenage love of charity shops. I’ve become more creative and couldn’t care less if someone sees me in the same outfit twice… on the contrary, I’m kind of proud.

How much do you need?

You should have enough spare money in your personal savings to pay for three months of living expenditures. This means rent, transport, bills, food and any other commitments you may have. It’s for emergencies, and those moments in life where you need quick access to money.

Getting to three months’ worth of savings may seem like a long way off when you first begin. However, perseverance is key. If you stick to the 50 – 30 – 20 rule, you should find that you’ve already hit the amount you need before eight months is up.

If my maths is up to scratch, you should get your three months’ of emergency savings within just eight months. This is following the 50 – 30 – 20 rule.

What’s next?

After you’ve built your emergency savings, the next stage of the process is to consider your life goals. What do you want to achieve? There is quite a lot of pressure to buy a property in the UK, but you don’t have to follow the beaten track. You might want to save up to travel the world, take a year out to write a book, study or restore a crumbling chateau in the South of France.

Think about your time-frame, how much money you’ll need and how much risk you want to take. As a generic starting point, you may want to consider starting an investment portfolio to pay for your your life goals. You may also want to set up a private pension so that you can have a more comfortable retirement. Both of these things can be started in a matter of minutes, and you’ll be set up for life.

Find out more about setting up your first investment portfolio here.