I reckon it’s an exciting prospect that a few small changes in your lifestyle and habits can lead to a life-changing improvement in your savings that will keep on growing.
You could be stuck in a rut of never saving anything for your retirement and wondering how you ever will. But I’m here to tell you that you can, if you think you can, perhaps with these five ways that could help you boost your savings forever.
Set up a standing order
It’s a good idea to go through the mechanics of regular saving by setting up a standing order from your current account to your savings account. Even if it’s just for £1 every month to start with. Think of it as a symbolic act, a declaration of intention, and the beginning of a savings journey that will last a lifetime.
If you are automatically saving £1 each month and keeping that saving habit sacrosanct, the next goal is to steadily increase the amount you save. Read on for some ideas to help you do that.
Live below your means
Nobody ever got rich by spending every penny they earn, so you’ve got to live below your monthly income and channel the left-over money to that standing order. Look for savings you can make in your everyday budget. I won’t bore you with suggestions because you’ll find them yourself – but be sure to do it!
Increase your income
As well as limiting your outgoings, you can increase your income. Maybe by gaining promotion at work, by setting up your own business, or by working extra hours. But if you do that, beware of lifestyle-creep.
It’s no good earning more only to upgrade your lifestyle and spend all the extra. Instead, aim to peg your expenditure and channel the extra money you are earning to that standing order.
When your savings start piling up, you need to make that money earn its keep and work hard for you. Choose the highest-earning interest rate savings accounts you can find and let the interest stay in the account to earn interest again. If you do that, you’ll be compounding your money, which is key to creating wealth.
The exciting thing about the process of compounding is that it works exponentially over time – the returns you earn on your savings accelerate and grow ever larger.
When you have enough in your cash savings accounts to make it worthwhile – say around £1,000 – I’d switch to investing in shares and share-backed investments on the stock market. Over time, shares have outperformed all other major classes of asset, such as property, cash, and bonds.
Indeed, the returns you’ll make from rising share prices and dividends will likely be larger than anything you can earn in a cash savings account. And in that way, over the long haul, shares could help you compound your way to a happy financial retirement.
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Kevin Godbold has no position in any share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.