Impulse spending by people under 30 is common, but don’t despair if you find yourself struggling to save money. You can do it - just know your monthly outgoings and start small…
It’s not easy to save when wage growth has taken such a hit in recent years. You have less money in your pocket – and what you have is needed for expensive essentials such as food, rent or mortgage, and utilities. So, make the most of what you’ve got and get saving.
Know your limits
If you are being paid on your company’s PAYE system, you’ll know your monthly income after deductions. But how many of us keep such a close eye on our monthly outgoings?
Until you know your monthly outgoings, it’s difficult to save. So, work out what you are spending each month using a budget planner. Just enter your income, followed by your outgoings. By knowing your outgoings, you can manage them. Then, if there’s any room for reducing your spending, it’s easier to do so.
Set your budget
To create your monthly spending budget, divide your outgoings between needs, wants, savings and debt repayments. To do this, adopt the 50/30/20 budget rule. By sticking to the 50/30/20 split you can manage your regular expenses and debt repayments, cope with unexpected costs, build your savings and the interest you’ll gain from that, and still have some money left to treat yourself.
Aim to spend no more than 50% of your after-tax income on necessities, which may include:
- Utility bills (including mobile phone)
- Food (essentials, not eating out and takeaways)
- Insurance payments
- Commuting (petrol, vehicle tax, public transport)
- Child care
- Minimum debt repayments
Then you can allocate 30% of your after-tax income on wants. These could include:
- Eating out/takeaways
- Gym membership
- Event tickets
- Trips out
- Shopping for clothes
- Savings towards a holiday
Once you’ve assessed your needs and wants, this leaves 20% for your savings and/or extra payments to speed up your debt repayments.
As an example, if your monthly income was £1,500 after tax, you might spend:
- £750 on needs
- £450 on wants
- £300 on savings or debts
Make savings to save
You could save money on your needs and wants by, for instance, cancelling subscriptions, checking out different energy providers, and cutting down on eating out.
Or, if you can live without that gym membership, you could easily save £500 a year. And stop and think before you click on that ‘must-have’ dress or pair of jeans. Is there something in your wardrobe that’s just as good that you’ve forgotten about?
Generation Z, those born between the mid/late 1990s and 2015, is the demographic most likely to impulse buy. So, if that’s you, don’t worry, there are savings to be made if you want them enough.