Knowing where to put your savings is half the battle. The harder decision is finding ways to free up more money or save in the first place.
The good news is that saving more is not as much about willpower than a lot of people might assume.
The savers who do the best are usually those who set up good systems so their savings happen by default and spending takes more effort. Here are some useful strategies that can add up over the long run for people in Ireland trying to save.
Pay Yourself First
One of the most important pieces of advice is to prioritise putting away money each month, as many people look after everything else first and there’s little to nothing left over after.
Set up a direct debit so a fixed amount is moved into a separate savings account as soon as your salary arrives, so you don’t get an opportunity to spend it. This should be treated as a bill similar to your mortgage or rent, being one of your non-negotiables.
You then adjust your day-to-day spending naturally, as you don’t even see the money before it turns up in your account.
Automating this decision removes the need to make it on a monthly basis, and is one of those habits that goes the longest way.
Attack the Big Fixed Costs
Some people will agonise over relatively small costs like their daily cup of coffee or a newspaper that might save you a few euros every day. However, the likes of changing energy provider, moving health insurer or renegotiating your mortgage can save the same amount in a single afternoon without needing any extra willpower.
Fixed costs are one area where real savings lie. Markets often reward switchers, as longer customers get put on worse terms and incentives exist for new sign-ups.
Put a reminder in your calendar to shop around each of them on the renewal date each year. This small effort means that the savings are often large and recurring without any extra work.
Clear High-Interest Debt First
Savings accounts will pay you enough interest to compensate for the high-interest debt that you have elsewhere, such as with your credit card.
Anyone carrying an expensive debt should do their utmost to wipe this clear before looking at different savings products. It’s good having a rainy day fund, but everything else should be focused on clearing debt. It’s a high-return move available to most households, so it’s well worth pursuing.
Track Where Your Money Goes
You can’t cut costs where you can’t see the money going. If you take a detailed look at where the funds are going each month, you can have a much better perspective on where you’re allocating your resources.
Many people have forgotten direct debits, unnecessary subscriptions, money going into horse racing betting odds, and a slow creep of other small purchases.
Most banking apps will now automatically categorise your spending, which takes a lot of the work off your hands. You don’t need to be an expert to spot patterns.
Many people follow the 50/30/20 rule, where about half your income goes towards needs, 30% on wants, and 20% on savings and debt. This is a good target to aim at without micromanaging each euro.
Cut Recurring Charges
Subscriptions are designed to be forgotten and that’s why they can add up significantly over time. Streaming services that you no longer use, apps you downloaded once, a gym membership signed up for in an optimistic January, free trials that converted into a paid fee, all add to the overall monthly drain.
It’s worth going through the previous three months of your bank and card statements line by line and cancel anything you don’t consciously choose to keep. You force each subscription to re-earn its place and don’t let it renew automatically.
Slow Down the Bigger Purchases
Lastly, inflation is a real factor, as people tend to increase their spending as their income increases. This is how people feel stretched constantly, even when their take-home pay rises. A pay increase could disappear into a bigger car, a more expensive apartment, or overall costlier habits, without the level of savings ever improving.
One useful rule to follow is to have a cooling-off period of 24 or 48 hours on any non-essential purchase above a certain threshold, such as €100. The urge for many impulsive purchases can quickly pass once the initial temptation passes.
Another approach is to divert more of your raise or bonus into savings before it becomes your new normal. That means you’ll never adjust to the extra money and never miss it, while your savings will increase constantly.
Have a Destination for Your Savings
It can be quite vague just saying that you’re going to simply save more. Setting specific targets is important. This could be saving €7,000 for a house deposit before December. This is a target that you will have at the front of your mind the next time that temptation to make a frivolous purchase pops into your head.
Naming your goals can change your behaviour, as money labelled for a specific purpose, like a deposit, wedding, trip or emergency fund, is psychologically harder to dip into than just an anonymous pool of money.
Using separate accounts for different goals can reinforce this effect. Changing an abstract intention into something you can watch grow over time. Progress you can see is what you’re likelier to protect and hitting an early milestone builds the momentum that carries the habit forward.
Saving more isn’t something that needs to be left to willpower or discipline, as setting up a smart design can go a long way.
Automating transfers means that your savings happen without deciding and focusing on cutting large and recurring payments, which are the ones that really add up nicely. Clearing expensive debt before chasing modest returns is another big focus, while not letting a pay rise lead to a proportional increase in your spending is vital for keeping on track.
