Saving money helps to be financially secure and provides a safety net to face out financial emergency. With more advances in health care, now the people have a longer life than before. Apart from several indirect benefits like a sense of financial security, saving helps you in a beautiful way when you retire from active earning. It is said that saving the first £100k (Save 100000 pounds or dollars) is more typical than the conservation afterwards; however, the task can be simplified by making some easy changes in lifestyles and habits.
Strategy to Plan How Much Can Be Saved Potentially
Before starting the march on the path of saving £ 100k, you must know the capabilities. Only the realistic saving target can keep you determined. The budget should be developed according to the net income that is your take-home packet. Some people consider gross income while planning for saving. The potential monthly saving is the difference between net monthly income and regular monthly expenses. While developing the saving plan, ask these questions:
Are there some expenses that can be reduced or eliminated?
Are there alternative ways to reduce the needs for money?
Here are five key points that should be encompassed by the saving strategy:
- Pay first for saving – List the savings as the fixed monthly expenditure.
- Use an automatic saving method – Set up the automated process for funds transfer from salary/earning account.
- Save all or the part of certain income type – like a tax refund, tip money, annual bonus etc.
- Name the saving buckets like things you wish to do, holiday shopping, vacation tour, retirement etc.
- Create an emergency fund at least of £1000.
The Barriers on the Roadmap to Save First £ 100K Money:
Certain factors force to deviate you from the saving plans but if you know these factors you can take actions to manage these without disturbing the savings: Rising monthly expenses because of inflation rate; emergency expenses like car repair, roof repair, illness etc.; unemployment; delayed salary; dull business season etc.
Almost 10 million British households have no savings. The extra 340,000 British homes could save nothing since a year. The numbers of families in the UK with no cash saving increased @ 3.5% in 2017. Without having any saving buffer, the British houses easily fall into long-term debt problem forcing them to pay high-interest rate and hefty penalties. The fact correlates the ever-increasing consumer debt increased by £1.9bn in February 2018 – a report by Money Statistics. The debt owed per British adult reached £1,169.92 in February 2018. According to Halifax, the average cost of the house reached £227,871 in March 2018, the highest since the records began.
How to Save First £ 100K Money:
Now you know how much you can save and how much you need for different needs but saving regularly is a tedious task especially with fixed monthly income while the inflation rate is unfavourable. Still, there are the best tips to save £100K fast:
The Right Mindset:
- Saving is a tough goal to hit. It is a challenging long-term task. To run the goal, you must train the mind to understand new ways to achieve this target with an accurate plan. If you rarely do budgeting or note down the expenses, start it-
Set Short-Term Saving Goal:
- To stay motivated for saving, break the long-term saving targets into the short-term objectives. The short saving period may be of a quarter or six months or a year. Starting the saving early and steadily helps you achieve long-term saving targets. If you are a business owner, you may opt for the daily saving goal also. The saving amount will help keep you fired for a longer-term goal. Savings account, term deposit, recurring deposit, money market accounts etc. are the time tested available short-term saving instruments.
Save on Taxes:
- Saving is better than paying taxes. If you are a first scale taxpayer, the first £1,000 of interest from savings is tax-free. Settling into a pension scheme is also an excellent way to save more with the tax benefit. Getting tax credits is also a smart move to keep more. The 401(k) plan is also useful to contribute smoothly for £ 100K saving. Capital gains tax (CGT) allowance is too reasonable to support your saving plan; it is the profit you make by selling part of investments, second homes, decorative decor items, shares and antiques etc.
Reduce the interest burden:
- The high numbers of British households are suffering from a high amount monthly instalments of more than the one debt. Borrowing is an everyday necessity, but the facility should be used optimally. Check out for the lowest debt balance and repay it complete to reduce the numbers of debts because the amounts of liabilities you owe pull down the credit score. The credit card debt is the worst affecting debt type for UK households because it encourages people to make unaffordable purchases even without having funds in hand.
Plan for additional income:
- Ok, your monthly earning is fixed, and it is just enough to meet out the regular living expenses leaving nothing to deposit in saving the account. Just plan to take on an online job for free hours when you are back from office, or you are on holidays. The numbers of freelancers are earning decently in their free time. Professional engagement in free hours will curtail the monthly expenses that you would do otherwise by going to pubs, clubs or friend’s home.
Minimise the living cost:
- If you can’t earn more because of particular limitations, you can save marching ahead on £ 100K saving roadmap by minimising the monthly living cost. Using public transport instead of a personal car just to save few minutes, eating out just because of additional comfort hours at the house, going to a movie on holiday etc. are the few gaps that you can fill up by changing the living style and habits.
Limited monthly earning seems the most significant barrier inconsistent saving while it is not so; it can be crushed by changing the habits, living style, mindset to keep more, and following a strategic £ 100K saving plan with self-discipline.