So you want to save some money? Welcome to the club. We talk to an expert to help you find the best strategy for your budget
As the saying goes, a penny saved is a penny earned – or dirham, in our case. And when it comes to saving cash, with so many options available, it can be difficult to know where to start.
But seeing as the days of keeping our money under the mattress are long gone, financial expert Trevor Pelling has some smart savings tips for getting started, from short- and long-term plans to finding what options suit you.
Bust the budget
Whether it’s a short-term or long-term plan that you have in mind, the first thing you have to do, says Trevor Pelling, senior wealth manager at Guardian Wealth Management, is the maths, to figure out how much you can afford to save.
“People should really look towards their budget and what they’re spending on a monthly basis – that way you will know if you are spending within your means.
“There are three areas that everyone should budget towards. The first is the ‘now’, your current spending. The second is ‘sooner’. This might mean things like holidays, house deposits or emergencies. The final category is ‘later’. In our experience, this would usually be in a more structured way of savings that you commit to save for a period of time for a particular goal; in this case it would be retirement or tertiary education costs.”
But how do you know how much of your monthly salary to save – and where do you prioritise it?
“There’s no one-size-fits-all,” Trevor emphasises. “After you’ve worked out what you’re spending, a good idea might be to cut the surplus income in half, with half going to your ‘sooner’ fund and the other going towards ‘later’.”
Planning for the future
With savings accounts, investment plans and more available to us, knowing what to do with your money once you’ve saved it can be baffling.
For starters, Trevor urges us to be savvy and have an emergency fund.
“We can’t predict life,” he says. “There’s an old saying that ‘cash is king’. What that means is that if you have enough liquidity, then you rely less on loans and credit cards.
“There will always be emergencies, and that’s why you need to save a buffer,” he adds. “It’s so that when something is out of your allowance, you don’t have to worry about finding the funds for it.”
As for where to put it, Trevor recommends keeping easily available funds in your local account, as well as offshore. And once you’ve amassed enough capital, you can then start to consider your investment options for the longer term.
“You can look towards a medium-term investment, such as a fixed-term deposit or a platform-based product that allows you relatively low-risk investment with instant access,” he suggests.
Long-term investments may also be a consideration for those willing to lock their money in over a period of time, but beware that access to your cash may be more restricted, Trevor adds. But if you’re unsure about your needs, it’s always a good idea to seek professional guidance.
“The advice should be catered towards your own attitude to risk, where you are in your life cycle and how much you can afford to pay on a monthly basis,” he advises. “An important factor is not to feel pressurised – you’re going to have a long relationship with the adviser you choose, so it’s important to have that trust.”
For more information on Guardian Wealth Management, visit: guardianwealthmanagement.com
Know your expenses: “You can use a notebook to record your purchases, or an Excel spreadsheet – whatever medium you’re comfortable with,” advises Trevor. “Keep
an eye on your bank statements and areas of your life where you can trim out additional costs without any life changes.”
Don’t give yourself credit: Though it can be tempting, Trevor advises using credit as little as possible: “Keep the limit low and know how much you can afford to pay off.”
Pick what works for you: “If you’re working with an organisation or person, one way you will know their legitimacy is if they try to cater to your needs individually rather than an off-the-shelf product,” says Trevor.
Later life: If you’re not doing so already, be sure to factor in making contributions towards provision for later life, including your pension.
WORDS Camille Hogg