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[AD] If you haven’t heard, there’s a cost of living crisis going on. It is impacting different people in different ways, but there are only a few that have been able to get by without feeling the consequences.
Energy bills shot up in April and there is another major increase waiting for us in October. Alongside the fact that petrol and diesel prices are on the increase, food is going the same way and more and more people feel like they have to choose between their big dreams for the future and the basic necessities.
New research from GoCardless, a global payments company, suggests that Gen Z and millennials are some of the worse hit. 63% of those surveyed stated that in the circumstances they were struggling to save. Furthermore, 48% said that they felt they would struggle to reach their life goals and 54% said it would be impossible to save for their first home.
With all that in mind, I wanted to give the younger generations some hope by sharing a few strategies that got this millennial through the last recession with her life goals intact.
Set a clear goal
Never! EVER! underestimate the power of a good, well-defined goal. Without a goal, your attempts at saving are basically just moving money from bank account to bank account. With a goal, each transfer gets you one step closer to your dreams.
I have set some big goals in my life: buying a house, travelling the world with my family, going part-time, and starting a business to name a few. Knowing what I was aiming for was really motivational. But I didn’t set any old goals. I made sure that my goals were CLEAR.
This meant that I had figures in mind and time frames that I wanted to complete them in. This looks like “I want to save £12,000 over the next three years to buy my first house.” From there you can break it down into even smaller steps such as £333.33 per month.
I think you’d agree that this course of action is much more likely to succeed than something like “I must save a house deposit.” You know what you want, but there’s no plan to get there.
Spend consciously
The cost of living crisis has forced many of us to take a closer look at our finances. Gone are those days of spending carefree and just saving what is left at the end of the month. You need to take a closer look at where your money is going.
Thankfully, now that you have a clear and motivational goal you have a great point of comparison. When there’s a choice between your third UberEats of the week, or buying that dream first home, hopefully, the choice will be easy. Or perhaps it’s that amazing rice cooking machine you saw on TikTok versus taking your kids to Disneyworld.
The trick is not to cut out all the fun, but to choose carefully. Keep your goal in mind and spend consciously.
Make your savings work
Why should you be putting in all the effort to achieve your life goals eh? With some savvy money moves, your savings can actually pick up some of the heavy lifting.
Interest rates are on the rise, which is good news for savers. But there are still plenty of savings accounts out there that are only paying their customers a disappointing 0.01%.
By switching your savings account, you could get a much better interest rate (although still trailing behind inflation, unfortunately). This will mean that your savings are working harder to grow.
If you are looking to purchase a house, or even if you are saving for retirement, you might want to look into a lifetime ISA. These savings accounts give you a 25% bonus on top of any interest, on up to £4,000 of savings every year. Not to be sniffed at!
It’s OK to say no!
It comes as part of the parcel when working towards big and important goals that you have to make some choices. This might include saying no to things that you may have enjoyed.
Good examples of this include invites to nights out or mini-breaks with friends and family. What it doesn’t mean is that it has to be a no forever. One day, you will be able to yes to these events again.
In the meantime, why not suggest a cheaper alternative? Try drinks around yours or set up a Come Dine with Me competition amongst your friends. Creativity is your friend here. Plus, remember many of these events are about spending time with people you care about and not the activity itself.
If you are still nervous about saying no, then think that you may be helping someone else out too. Perhaps another friend is in the same boat but wasn’t feeling brave enough to decline. You could turn out to be their hero.
Get lazy with your finances
The research from GoCardless found that 31% of the younger generations just don’t have time in their day to think about managing money. I am with you on that one. This is why I like the lazy option.
Technology has made our lives easier in so many ways and this includes your finances. One new technology to look out for is Variable Recurring Payments (or VRPs for short).
These are a new payment form where you can automatically move money from one account directly to another — think of them as Direct Debit, but instant. Banks across the UK will start to roll these out from July. Once your bank is online, you can set up certain rules for VRPs to help us move money exactly where we need it.
One example is setting up a VRP to move money from your savings account to an investment account. Traditional Direct Debit could do this for you, but VRPs will have the money in your account way sooner, often within a day, rather than 2 or 3 days. In terms of investment, time is money — so the sooner you have money in there, earning interest, the more money you have.
Once VRPs are set up with your bank, you will be able to set up those regular savings payments and sit back as you get closer and closer to your goals. If you want to increase or decrease your payments, you’ll be able to do this easily via your bank.
You can’t change the economy
But you can take control of your personal economy. Yes, you might find that you don’t have the same amount of spare cash available right now, but the trick is consistency.
Even small amounts of money saved will get you closer to your goals. Trust me when I say that you will be grateful for these actions you take today, even just a few months or years down the line.
