15 hours ago
The smart way to spend your salary
September 23rd 2016
Wages gone AWOL again? Don’t let it happen this payday…
We’ve all had alarmed ATM face at some point in our lives, but if ASOS et al are pretty much banking on receiving the majority of your pay cheque every month, it’s time to do a little self-assessment. Whether you’re already worrying about Christmas shopping or struggling to pay for your lunch, we promise there’s a better way, and it doesn’t involve scratch cards or selling your soul. Just take it from Jasmine Birtles, founder of moneymagpie.com and internationally renowned financial expert...
Do the maths
“The first thing you need to do is work out what your essential bills cost each month, so add up your rent or mortgage, utility bills, council tax etc, plus a basic amount for food, travel, clothes and whatever keeps body and soul together and the roof over your head. Essentially this is what a budget is and it’s worth using one of the many budget calculators online to do this (we have one at www.moneymagpie.com/budget)."
“Once you know how much you have to spend each month then you just take that away from what comes in and you then know how much you have to play with. Actually, while you’re doing this, you could also bring your monthly bills down by switching to cheaper options. Even if you just do one a day, after a week you’re likely to have saved yourself at least £100 a month just by moving to different providers (again, you can use the comparison tables on my site here).”
Save and invest
“Then you should set up some standing orders to go out at the same time as you pay your bills, ideally as soon as you get your pay, to go into savings and investments.”
“As a rule of thumb, when it comes to putting money away for your future (i.e. investing), you should take your age, halve it and use that as the percentage of your income that you invest. So if you’re twenty, ten per cent of your income should be put into pensions, stocks and shares ISAs and other products that give a good return over time. If you’re fifty you should put 25 per cent in because you have less time for that money to grow so you need to put more in at the start. If you have a workplace pension you can include this in the percentage but it’s likely that you will need to put away more than you’re paying into your company pension as those amounts are often quite small.”
Have an emergency fund
“You should also, however, have easy-access savings that you can turn to if you suddenly can’t earn for whatever reason.
"The rule here is that you should work out how much you have to spend each month on bills etc (check the budget that you’ve just done) and multiply that by six.
"Put that amount in a savings account and don’t touch it unless you lose your job or something and can’t pay the bills for a while. So, if you’ve worked out that it costs you £1,000 to pay the mortgage, bills, food etc per month, put £6,000 in an easy-access savings account.”
“Also, think about the things that are important to you that you want to spend on each year, so that you can set up savings accounts for those. It’s a good idea to have an emergency fund for repairs or replacements. It’s cheaper than taking out appliance insurance to just put, say, £20 a month into a special account that you use if machines or the car goes wrong. If Christmas is important to you, set up a savings account for that where you put, say, £20 a month to spend in December (or more or less, depending on how much you think it will cost you). Do the same with a holiday account, maybe you have one where you put £50 a month in, or more, depending on how much your holiday will cost.”
“It’s like having online ‘jam jars’, where you put a bit of cash into each ‘jam jar’ savings account every month to build up money for different things you need to spend on in the year.”
How do you save and what do you spend most on? Comment below or tweet us @GetTheGloss
Follow Jasmine on Twitter @Jasmine
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