Living from pay cheque to pay cheque seems to be an increasingly common way for many of us to deal with our finances. Yet with a bit of effort and planning you should be able to create short and long-term savings plans that will help you toward financial security once you retire.
It is important to ensure you have sufficient savings to fall back on when you retire to supplement your pension income. This is because many people have not given close thought to just how much money they will need to live on to enjoy a happy retirement.
The sooner you start, the bigger the eventual returns will be. A 2012 report by the Institute for Fiscal Studies in the United Kingdom found that six in 10 people over the age of 50, who were still in the workforce, had not yet thought about how many years of retirement they might need to finance, which means that millions of British workers will be poorer than they expect when they retire.
The good news is that there are some sound and sensible steps that you can take right now to help you move toward establishing regular savings that can always then be ploughed into your existing pension plan as additional voluntary contributions, thereby increasing the final pot of retirement money.
Track your expenses
To begin with, it is always a good idea to keep a close track of your expenses. This way you begin to build a picture of where your money goes on a monthly basis, giving you a clear idea of where you can focus your energies.
Is your electricity bill higher than it needs to be? Get the entire family to focus on energy saving. Is your grocery bill through the roof? Buy generic brands, look for weekly savings and ensure you take advantage of individual grocery store offers and promotions (Hurley’s discount Wednesdays, Foster’s daily specials and Kirk Market “currency”, for example).
Shop around for insurance, look to ensure you have a fuel efficient car. Entertain at home more instead of eating out. Ditch the daily cappuccino in favour of the office coffee.
Make sure you are on the right Internet/telephone tariff that caters to your specific needs.
Once you know how much you spend you can work out a sensible budget that makes allowances for saving on a regular basis. It does not matter how small the amount is that you set aside for saving – over time that money will accumulate into a useful sum.
Setting savings goals is a useful way of ensuring you are motivated to continue to save. These can be short term, such as for a new television or computer, or more long term, such as for a car or a deposit on a home.
You can set personal goals for yourself or goals that the whole family can work toward. Set yourself an attainable time frame for achieving what you want, for extra motivation. Then you need to work out how much you need to save per week or per month in order to reach your goals.
It is a good idea to work out how much you will need to contribute to live comfortably when you retire.