Should I be saving for the future or enjoying my life now?
The answer to this question, in principle, is actually quite simple;
It should always be a bit of both.
Squirrelling away all your available funds to the detriment of current living standards can be counterproductive. Just as spending all your funds today with no thought for the future can you lead to trouble in later life. It’s like a food diet plan, fad diets with rapid weight loss are just as unsustainable as trying to save every single penny of disposable income, and both can lead to unhappiness.
So how can you strike a balance between how you save for the future or live for the now?
The first and most important step is to carry out a very simple budget.
There is no need to spend hours counting up every penny of expenditure from your bank statements. Just get a rough idea of what your regular fixed and discretionary spending looks like and compare it to your net income. Citizens Advice has a helpful budgeting tool for this.
Think about what you are trying to achieve. Ideally you will put a bit away for unexpected costs, repaying a mortgage or other debt, saving for retirement, or any other possible future cost or need. Don’t forget that paying down a debt can be just as valuable as saving or investing for the future.
There are lots of views on how much of your income should be saved for pensions, savings or investments but the starting point needs to be what you can afford. Don’t be afraid to seek help in determining this.
Decide how much you feel you can realistically put towards savings each month.
Once you have a budget and a number you can comfortably afford to save for the future, you then need to look at short term accessible savings, medium term, and long term saving options.
- Short Term Accessible Savings are typically very low risk savings accounts or premium bonds.
- Medium term savings options are perhaps a bit more risk but still accessible if needed. Like ISAs.
- Long term savings options may be higher risk and often in pensions.
Each saving option has different benefits and drawbacks. Often times, a combination of the three provides the most flexibility in gain and access. The most important thing is to start saving. Don’t put it off until you think you can save a much larger amount. Start the discipline of saving little and often then look to increase the amounts over time as and when you can afford to do so.
Now that you know what you want to save, you know what you can spend.
This is where the balance comes in. Once you’ve begun the habit of putting money towards your future, you can use the remainder to cover both current monthly payments and any additional purchases you want to make. Be it a holiday, new sofa or meal out with the family. The key here is to not live above your means. Thoughtful financial decisions should include minimising debt for the ‘nice to haves.’
There is no embarrassment needed when it comes to having a thrifty and financially aware existence. It can be easy to fall victim to adverts and social pressure that tells us we should own certain things or live certain lifestyles. The need to save for your future might not seem glamorous, but it can make the difference between a relaxed, enjoyable retirement vs needing to have an income for the rest of your life.
Financial planning can provide clarity on what you need to do to have the financial future you want.
If you would like more clarity on exactly what you could be doing to secure a strong financial future, get in touch. Each person’s current situation, future goals, needs, wants and ambitions will differ. The above is a simple roadmap to start you on the right path.
If you would like advice that is tailored to you specifically, Bigmore Associates can help. Our holistic approach and our process of getting to really now our clients sets us apart from the number crunchers and bottom line driven advisors. Yes, we aim to maximise your returns, but we do that in a way that is best suited to you, your preferences, and your personal circumstances.
Financial planning is not just for the wealthy. It is for anyone who wants to have a better handle on their past, current and/or future financial life. If this is you, we are here to give you that sense of security.
Article by Adam Nettleship
Managing Director, Bigmore Associates