Whether you’re saving for the future or simply want to take better care of your money, it’s never too late to start building good financial habits. And with inflation soaring and the cost-of-living crisis deepening, taking a firm grip of your finances now is a smart move for the future.
Of course, the internet is awash with guides on how to save money and improve your personal finances. But often, these resources provide only surface-level advice, with money-saving tips that are difficult to maintain in the long term.
Our guide is different. Here, while we’re not offering financial advice, we’re sharing help and insights that can change your financial habits for good, with five simple rules that can improve your overall financial health and help you achieve your goals for the future.
1. Create a Personal Budget and Spending Plan
The first step in improving financial habits is to review your current spending and budgeting so you can identify where changes need to be made. From there, you can create a bespoke spending plan that allows you to live within your means while setting aside money for future saving goals.
A formal spending plan – in which you list your income vs your outgoings – is an effective way to curb unnecessary expenses, prioritize savings, spend wisely, and make sure you have money set aside for emergencies. Take a proactive and transparent approach to ensure your spending plan covers all your outgoings; an honest assessment of your finances is the only way to make definite change.
2. Consider Your Spending Habits
What do you see when you look back at your recent bank statement? Where is most of your expenditure going? And how can you reprioritize your monthly outgoings to save money and get yourself closer to where you want to be financially?
A good habit to get into is to segment ‘needs’ and ‘wants’. These categories are generally self-explanatory, but it’s important to keep these costs separate since it’s easy to blur the line between the two and justify unnecessary purchases as needs rather than wants.
By actively taking the time to consider and separate needs from wants, you’ll slowly start to form better habits about what to spend your money on. Saying no to a handful of want purchases each month can be a surprisingly effective way to save money and get yourself in a better financial position.
3. Start Accumulating Savings for Your Later Years
Whether you’re in your twenties, thirties, or forties, it’s important to think about your retirement years and how you’d like to spend them. Because, while putting aside money now might seem like a waste of time – and better spent elsewhere – the accumulative impact of early saving can make a huge difference to your retirement pot, not to mention the sum you’ll need to put away periodically in the future.
Say, for example, you wanted a nest egg of $500,000 by the time you reached 60. Taking a 5% interest rate into account, you’d need to save $327.65 a month over 40 years to reach your goal. By contrast, if you suddenly felt the urge to start saving for your impending retirement at 50, you’d need to save an eye-watering – and perhaps unfeasible – $3,219.94 a month.
This type of compound saving model can apply to all financial aims, not just retirement. Whether it’s the down payment on a new car or the deposit for your first home; saving in small increments over a longer period is a good habit if you don’t want to be burdened by sizeable monthly saving goals.
4. Be Mindful of ‘Lifestyle Inflation’
One of the biggest barriers to wealth and savings building is a concept called ‘lifestyle inflation’. This essentially means that the more you earn, the more you spend, with an increase in spending to correspond with your growing salary.
Think about it: when your salary increases, the temptation to spend those extra earnings is only natural. Whether it’s a new car, more holidays, or designer clothes, any increase in earnings is quickly eradicated by a personal need to have more than what you did previously.
This is lifestyle inflation, and it can be a particularly innocuous phenomenon that impacts your ability to save and build wealth for the future. By becoming mindful of it, you can stifle that urge to spend and ensure that you’re using those higher earnings wisely.
5. Make Wise Investment Decisions
Investing is more accessible than ever and provides savers with a means of protecting their savings from inflation with the potential to make sizeable earnings besides. But before you begin buying stocks and signing up to investment platforms, you need to learn what makes a good investment, how to achieve long-term success, and be willing to put time into staying up to date with the latest investment trends.
For new investors, there are a whole host of different avenues which you can take to get into safe, smart investing. Your first may be to talk to your bank, which might be able to provide guidance and advice on the types of investments that best suit your savings goals and plans for the future.
Elsewhere, there are dozens of resources online which can help you get up to speed with investing, so do your research and dedicate plenty of time to learning the ropes before you commit to a specific investment pot.
At Glint, we make every effort to demonstrate a balanced conversation between gold, crypto and fiat currencies when it comes to purchasing power and, while we strongly believe that gold is the fairest and most reliable currency on the planet, we need to point out that it isn’t 100% risk free. While we have seen a steady increase over time, the value of gold can fall, which means that its purchasing power can also decline.
To learn more, visit our homepage or give us a call at +44(0)203 915 8111.
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