It’s a common and fair point that we should set money aside for the future. The fact of the matter is, however, that it can be quite hard to get started. Particularly when you look to your eventual retirement it can be intimidating to consider the amount you’ll need to have available.
The good news is that long-term saving is a mindset and is a game of inches; you don’t need to slash your spending and quality of life to enjoy the comforting knowledge that your future is in good and prosperous hands.
How much should I save?
The first hurdle for many, the actual figure for your savings can be difficult to lock down. Citizens Advice and government websites are a fantastic place to start. You’ll also benefit by taking a look at your employer’s arrangements for pensions.
You can potentially save much more efficiently by maximizing your employee pension; many companies offer generous co-pay options where they will match the amount you put forward. Keep in mind that these arrangements do have limits and you’ll be better suited to squeezing as much out of this facet of saving as you can before putting your further funds elsewhere.
You can compare your best practices of savings against your true income to give a solid estimate of what you can accomplish – there’s no point being unrealistic when you are dealing with years of savings!
What to do if I can’t save the amounts I need?
Your first step is to take a breath and not worry. There are plenty of options for you to tweak your savings with. Take a look at our other lists of saving options for a variety of topics to help shave down your monthly and annual expenses – you’ll be amazed at how far you can trim your wasted expense while still retaining your quality of life.
It’s also a very important point to look at maximizing your income, but only after you have trimmed your expenses down as above. It might be in your interest to evaluate your work situation and attempt to negotiate a raise, or even better make the move to a new employer. Studies show that you will receive far greater financial progression by moving employers every few years as opposed to sticking it out with a single company.
How to Invest
Generally speaking, long term savings are considered to be savings made for events five years in the future or more. When you deal with savings on this time frame, the major consideration will always be risk.
This is because your long-term savings will often come down to investment. Building societies and banks offer competitive savings options and tend to be reliable yet offer less in the way of interest and return. If you are willing to accept a slightly greater level of risk in the return on your investment you may wish to look towards other trading options such as ISA shares and stocks. These can be turbulent but offer a greater potential return over the years.
Think About Compound Interest
A key pointer for long term savings is the way compound interest works. You might initially consider your savings to be linear – you put a certain amount in each year and a steady return comes back. The fact is that there is much more to savings than that, with compound interest being a big part of maximizing your returns.
The way it works is quite simple. You put money aside in savings and the profit is reinvested into your fund of choice. A straightforward example of this is the following: You put aside £8,000 and leave it there in a saving fund that gives an eight percent interest rate. Nine years later you’re looking at a doubling of that amount via compound interest – not bad at all and much more than most would think possible.
Don’t overdo it
It’s a very common mistake when it comes to budgeting. The main point to keep in mind is that this is all done for your benefit; you don’t want to end up financially safe but miserable! Keep it positive and you’ll love the results.
If you need help, we’re here
Sometimes a helping hand is just what you need. Come have a chat with the team if you find yourself short – we’ll be very happy to go over your options.