Victoria Stokes asks the experts the burning questions about managing your money.
Yesterday, we gave you the first part of our guide to managing your money – and today we’re tackling more ways you can get on top of your finances, with the help of experts and people in the know. Read on for tips on starting a pension, and avoiding living pay day to pay day.
Poof! And just like that your money is gone. One moment you were flush, the next you’re too scared to check your bank balance. How can you make your paycheque go further and stop living on the breadline the week before payday without being miserable and making major cutbacks in the process?
“We’ve all been there,” says Gavin Keenan of Keenan Financial Planning. “The excesses, the impulse must haves, they all add up.” So to lessen that feeling of living from week to week, desperately holding out for Friday’s pay cheque, Gavin advises this. First, get good at shopping around, he suggests. “We all do it for clothing and electronics,” he explains.
“But start doing it regularly on your TV and broadband packages and gas and electricity bills. Try Bonkers.ie and you could start to make immediate savings that puts money back in your pocket and out of the providers’ hands,” he recommends.
You can shop around on fashion and beauty purchases too and that’s something Ciara, 32, regularly does.
If I need something specific like a particular kind of top or pair of shoes, I first see what I can find online. I then head to the high-street where I’ll start out in shops that generally have a lower price point. If I can’t find what I’m looking for there, I’ll work my way up to the more expensive brands until I do. It means I often find what I’m looking for around 20 percent cheaper in the first shop I go to.
Next, it’s time to do something a little unpleasant but totally worthwhile. “Take some time to print off your bank statement,” advises Gavin. “Then take a highlighter to run through your outgoings. Are there any patterns? Any unnecessary payments going out?” he asks. If there are, take stock, Gavin advises, and weigh up whether or not you really need them.
Once you’ve all that sussed, look to the bigger payments that are eating into your paycheque every month. “If you’ve got a mortgage, review your rate, especially if you are on a variable rate,” Gavin instructs. “Property prices have climbed back in recent years, but you may still be sitting on the old loan to value rate. Check with your bank and see if you are eligible to move down their rate scale.”
Finally, Gavin notes that getting financially right is a marathon, not a sprint. “We all want to be in a better place with money, but a goal without a plan is just a wish,” he explains. “Don’t be too hard on yourself in any case, and remember to do a little bit of saving in between!”
Many of us haven’t even started thinking about retirement. We’ve been too busy climbing the career or thinking about putting our money to other things, like rent or a mortgage to consider squirrelling it away into a pension plan.
But get this – according to Irish Life if you want a pension of 50% of your salary when you retire at 65, you’ll need to put away: 27% of your salary each year if you start saving at 25, 37% of your salary each year if you start saving at 35; and 58% of your salary each year if you start saving at 45. Basically, it’s better to get started sooner rather than later, but how?
First things first, if you had to live on a state contributory pension, for example, you would get €233 a week up to the age of 80, and €243 if you are over 80. Now that you know what you’re working with, you’ll need to figure out how much you’ll need on top of that to maintain your current standard of living and the lump sum you’ll need to have squirrelled away to meet that short fall.
Seems a tad overwhelming? The trick is to get started straight away, but how much should you put aside? One often-cited rule that can make things seems a bit more manageable is to divide your age by two and save this percentage of your salary each year. So if you’re 30, you should try to save 15% of your earnings each year, or if you’re 40 you should save 20%, and so on. It’s a very general rule of thumb, but a good place to get started.
Next up, you’ll want to suss out what kind of pension plan you should put in place. If you’re lucky, your workplace might already have a pension plan in place for you, but if not you’ll need to look at a personal pension plan or PRSA. Your best bet? Seek the help of a financial planner to help decide on the best one for you.
1. Don’t spend more than you earn
It sounds so simple, but if you spend above your means you’re going to run out of funds pretty quickly. Figure out what you have left over after you’ve covered those essential expenses, and then divvy up a budget for your disposable income.
2. Implement a 24-hour rule
Shelling out on a major purchase, essential or, er, otherwise? Not so fast. Before you drop that big spend, give yourself a 24-hour wait period. It’ll offer you the opportunity to figure out if you really need it and if you could potentially get a better deal elsewhere.
3. Put a little something aside
Emergencies are pretty inevitable in life, whether it’s discovering that your washing machine is suddenly on the blink or realising you need a new outfit for a last minute invitation.Whatever the dilemma, you’ll weather it a whole lot easier if you have a little nest egg resting in your savings account. Experts recommend about three to six months of your salary as a good lump sum.
4. Prioritise your spending
We all like nice things but they can start to lose their shine when your bank balance reads zero. Make sure you have enough to cover yourself each month for the non-negotiables first, and if you’re splashing out be certain it’s on something you really want.