How to establish a long-term savings plan
The start of the year can be a time when we set out financial goals for the year ahead, often short-term targets, such as saving for a holiday or a new phone. But when it comes to the long-term goals – a wedding, a house, or a new car – how do you go about saving for the big things in life?
Trying to find spare money to set aside has been a real challenge for many households over the past two years. High inflation, rising prices, and wages not stretching as far have left people with less spare cash to put towards life goals. In October 2022, inflation stood at 11.1% compared to regular pay wage growth of 5.6%, which made putting money aside even harder than usual.
However, recent figures indicating that wages grew 1.4% in real terms in the three months to November 2023, coupled with base rate hikes increasing the pay-out of many savings accounts, means that savers may now be able to set themselves on the path to their long-term goals.
Here, we look at some ways you can establish a long-term savings plan and start turning your most ambitious goals into reality.
Taking stock of your finances
Having a clear grasp of your financial situation can allow you to build a thorough and realistic budget. But how can you do it?
Firstly, it’s important to understand where your finances currently stand. It doesn’t matter how you bank or who you bank with; your incomings and outgoings are always readily available so getting a firm grasp on how much you spend every month and how much is left over shouldn’t be a difficult task. By committing any money you may have left over at the end of the month to a savings account, you’re setting yourself up on the path to financial security.
Utilising free budgeting services such as Money Helper’s budget planner can help you work out a financial plan that works for you. Whatever your personal situation, it’s best to allot a realistic amount to your savings each month and stick to that plan as best you can. Using automatic transfer services to move money into your savings or investment accounts makes your savings contributions regular and consistent.
These habits can be a great way to manage stress, track how your pots are growing, and reduce the temptation to dip into savings unnecessarily.
Seek advice and get educated
Knowing how to make the most of your money and how to make it stretch as far as possible can be a daunting task. With a large number of savings accounts available, deciding on the best one to suit your financial needs can come with a lot of pressure.
Financial education can also be a way of lightening the load when it comes to long-term financial planning. Reading and learning about personal finance and investment opportunities can be of great help when the time comes to make a decisive choice. A more rounded and complete knowledge of the financial system will lead to more confident and savvy decisions.
Review and re-evaluate your goals
As a rule of thumb, reviewing your savings approximately every six months is advisable. Visiting comparison websites and studying Best Buy tables can provide valuable insights into how your savings accounts compare with others available in the market. If your current deal isn't competitive, it might be a suitable moment to consider making a switch, as leaving savings at an inferior rate for a long time just means you’re leaving money on the table.
Reevaluating your goals is a good way to ensure that your long-term savings plan still effectively meets your objectives. Life isn’t always black and white, and circumstances can change in the blink of an eye, so the goals that were a priority may need to be adjusted.
So, whether investing in even longer-term savings products or diversifying your financial portfolio, you must constantly ensure that your savings strategy aligns with your long-term goals.
Looking forward in 2024
Whatever your long-term aspirations or goals, the good news is that the recent signs in the economic market are positive, with inflation under control and the Bank of England holding interest rates for a fourth consecutive time. This makes now the ideal time to consider all your options and choose the savings opportunities that support you in turning your dreams into reality.
Shopping around for the best returns on your savings is an easy way to add value to your finances. Exploring all sorts of accounts, not just the big high-street lenders, can reveal the most competitive rates and may even have lower fees. In addition, introductory offers are another simple way to ensure optimal returns.
Taken together, preparing a suitable budget, educating yourself on personal finance, saving regularly, and shopping around for the best interest rate will set you up for future success in meeting your long-term goals.