Why Now Is The Ideal Time For A Financial Reset
Plus, top saving tips from a pro.
Is it still impolite to talk about money? For many of us it’s a fraught subject, and one we often see discussed but without always feeling included in the conversation. Everyone is obsessed with what our generation do or don’t do with their money. The narrative frequently told by boomers is that millennials have no money as we spend it all on avocado laden brunches and flat whites. Now, I don’t know about you, but we haven’t been allowed near a ritzy café to munch sourdough toast and sip coffee for a while now, and I am no closer to my savings goals. So I think we can easily say that the avocados are not the problem.
In 2020, we’re about to go into our second recession in a decade (thanks, COVID), we’re already in the midst of a rent crisis, and are now living through a pandemic. And that’s without touching upon the general dumpster fire that is 2020 in terms of international politics and racial inequality. Feeling overwhelmed yet? These are obviously things that we can’t control, so let’s look at what we can.
The current situation can give us the chance to look at our spending habits a little differently.
Now that we are mostly confined to our homes and not blazing a trail through bars and shopping centres, we may be able to see for the first time just how much we had been spending day to day unnecessarily. Perhaps all those random trips to Penneys, the lunch break strolls around Zara and the after work wine several times a week were adding up more than you realised. Now is a great time to hit the reset button. Take a long hard look at your finances and consider where you can actually save money and set some goals!
For some who have lost their jobs or have been furloughed, you may not be in the position to do this yet. However, whilst you’re job hunting or waiting to go back to work you can still analyse your spending from before and set a plan and some goals in place for when you start working again.
Create a habit
We spoke to Eoin McGee, author of How To Be Good With Money, for his expert opinion on managing your finances and savings. We’re sure you won’t be surprised to know that the biggest hurdle people face is just getting started – it’s so easy to become disheartened and then not bother at all. Eoin’s advice? Start small. Like really small. Begin with a figure that is so low that if you can’t save it by the end of the month it’s almost embarrassing. He suggests starting with €10 a week. After this, you’ll have started a habit, and you can start to increase the amount gradually, which is not as difficult.
“Psychologically there’s a huge difference between starting, which is much harder than turning up the volume, which is much easier.”
Eoin also reassured us that once you actually begin, it can become quite addictive, and you’ll enjoy watching your savings pot increase month on month. You gave to make the choice and say to yourself “right, now I’m a saver” and then you’ve created a new habit.
Creating the habit sounds easy, doesn’t it? Then why every month, despite your best intentions, is your savings goals still nowhere closer? 85 percent of us get paid by the month, and according to Eoin, one of the biggest mistakes people make is to try and save at the end of the month. For four weeks this means restricting yourself and saving whatever you have left in your bank account by the following payday.
A much better way of doing this is to have a plan in place beforehand and put your savings away when you first get paid. Then, the money you have left in your account is yours to spend for the month, guilt free as you’ve already put away your savings! Make sure you’re not being overly ambitious though with the amount, as you don’t want to have to dip back into it. It all sounds simple, doesn’t it? But it’s all about getting started and taking that first step.
Have short term goals
If you’re saving towards something specific like a car, a holiday or even a house, Eoin advises his clients to always have short term goals too. Unless there is a quick turnaround to what you’re saving for, it’s important to have these smaller targets to hit along the way. If you know you’ll be saving for something for a year or two, setting short term goals every 3-6 months is a great way to stay focused and positive.
For example, if you’re saving for a massive goal like a house, it’s good to have a weekend away as a short-term goal in-between so you have something to look forward to. Likewise, if you’re saving for something bit smaller like a car or a big holiday, have a short term goal of a really nice dinner out.
How to save?
We now have so many options for banking. Along with the traditional banks we know so well, companies like Revolut and N26 have revolutionised how we pay for things and how we can save too. They give us options to create ‘vaults’ or ‘wallets’ to divide our savings into – and many banks also offer this service now too, including AIB. Eoin highly recommends saving in this way, and more importantly to name your savings folder. For example, you could have one called ‘Holiday’, and another for ‘Car’ or whatever it is you are saving for. There is an important psychological reason for this too.
Eoin gives the example of a couple saving for a weekend away. Let’s say your boyfriend comes home and says “let’s go out for dinner” but you haven’t really got the money to do so. If you have vague labels like ‘rainy day fund’, it becomes far easier psychologically to dip into this for unnecessary reasons than if it has a clearer purpose. If your savings vault is labelled ‘weekend away’, it is actually quite difficult to dip into this as you know exactly what the money is for. This is because when you have an “emotional attachment, you’re more likely to achieve it.”
At times it can feel a little overwhelming to have lots of vaults all saving for different things, but Eoin advises not to think of it as lots of accounts to keep on top of but instead just as one big savings account filled with lots of different folders.
We’re constantly talking about time at the moment, as some of us have more of it than ever before. If getting on top of your finances was one of your goals for 2020, don’t let this pandemic stop you, even if you’re not working at the moment. Take this chance to look at where you spend and where you can save, and set some plans in place for when you go back to work. Don’t forget to budget in those flat whites too.
Top savings tips
- Just start, even if it’s only €50 a month
- Put your savings away on payday – even better, set up a direct debit so savings don’t even hit your current account
- Have a clear goal – a total to be reached by x time
- Have short term goals too – “I won’t dip into my savings this month”
- Set realistic goals – don’t restrict yourself too much
- And take it slowly. There’s no point vowing to save a mortgage deposit in a year. Give yourself time.
*Images via Unsplash & Twenty20*
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