- Summary:
- If you’re trying to save for a deposit, pay off your debt or make any large purchase, you’ll be well aware of the difficulties of saving money. But could an ISA help you?
If you’re trying to save for a deposit, pay off your debt or make any large purchase, you’ll be well aware of the difficulties of saving money. Now, with the current cost-of-living crisis in many countries, achieving your savings goals is becoming harder than ever.
However, despite these issues, there are still many ways you can boost your savings. If you want to learn more, keep on reading to discover how you can achieve your savings goals and stay financially secure.
Open an ISA
With an indivudal savings account, commonly known as an ISA, you can easily save money and earn tax-free interest on what you save. Unlike a typical savings account, you can only deposit a certain amount of money into your ISA each year, with the current limit standing at £20,000 per tax year. Overall, having an ISA is an excellent, tax-efficient way to save money and meet your savings goals.
There are a few different types of ISAs, including Cash ISAs, Stocks and Shares ISAs, Lifetime ISAs and Junior ISAs. The type of ISA you should get will depend on your goals and current circumstances, so make sure you research each option before making a decision.
Assess your finances
Once you have an idea of what your savings goals are, it’s time to assess your finances to discover what you can reasonably achieve within a certain timeframe. For example, if you’re hoping to save up for a deposit but you have no prior savings, it’s unrealistic to expect to achieve this goal within just a few months. Assessing the current state of your finances will help you determine appropriate timeframes and strategies for your goals, so don’t forget this important step.
Track your spending
Part of assessing your overall financial situation is tracking your weekly and monthly spending. Are all of these purchases necessary? Are there any common purchases that you could feasibly cut out to save money? Tracking your spending will help you determine what’s holding you back from achieving your savings goals, thus helping you develop a strategy to overcome these issues.
Create a budget
Finally, once you’ve assessed your finances and tracked your spending, you can start assembling your financial plan for achieving your savings goals by creating a monthly budget. By tracking your spending, you’ve probably identified patterns that suggest where you can make improvements, so this information can be incorporated into your budget.
Then, you need to decide how much money you’ll allocate to certain categories, such as savings and discretionary spending. If you’re struggling with this, you could always follow the 50/30/20 approach to budgeting, where 50% of your money goes towards needs (e.g., rent, bills, food), 30% goes towards wants (e.g., dining out, recreational activities), and 20% goes towards your savings. If these ratios don’t work for you, then you can always adjust them to suit your goals and financial situation. For example, if you want to save money quickly, you could increase the percentage of your money that goes into your savings account.
Achieving your savings goals requires a lot of discipline and hard work, but there are ways to make this process a bit easier. Follow the advice in this article to learn how to save more money.