The first task for anybody looking to invest in anything is to start saving! Here is a 7 step guide to start saving successfully.
1. Write down you savings goal
What is it you are saving for? A deposit on a house? A holiday? A new car? Whatever it is, write down the amount you need to save. I will make it more real and make you think about what you really want.
2. Write down your existing spending
Its very simple, log in to your online banking and one by one categorize your spending for the last full month, or even better over a 6 month period so that you get a better average. Categorize your spending into rent, bills, food, clothing, entertainment and whatever other categories suit your current expenses.
3. Filter out the non essentials
Take this categorized spending and start asking yourself what could I remove from this and still be OK? What do I need and what do I want? In this step be ruthless. Cut it back to only the bare essentials, rent, food (if you cook at home), travel for work, essential clothing (you don't need to have the best designer clothes!), health and anything else you personally need. Things that aren't needed are eating out, social nights, cinema tickets or new gadgets. These lists are not exhaustive but you can get the idea. Don't worry I'm not suggesting you get rid of everything just yet, but you need to see whats technically possible.
4. Decide how much money want to set aside each month
Look at the difference between what is technically possible for you to live on and what your income is. In theory its possible for you to save this! In practicality its a bit different. Saving should not completely remove your life, after all your health (mental as well as physical) could be your most important investment. Find a balance. You might decide you can do without all of the nice things depending on your desire to save and invest. If you can great for you, but you might decide you need €500 per month for yourself. That decision is up to you, but be honest with yourself here. Its nobody else's responsibility to let you save that deposit, or get that first €1,000. If you can't give up things or find a way to set something aside, don't expect to be reaching your goals any time soon and don't try to blame anyone else for it.
A good number here is 10-30% of your income, but anything is better than nothing! If you can start only with €20 then do. It will get you into the habit of saving and can give you a sense of achievement when you start to see it grow. You might even decide that you can cut back on your spending and add a bit more.
5. Set up a savings account
Set up a separate savings account. This will allow you to set aside the money you plan to save each month and keep it safe from those moments of weakness! Keep this money separate and only touch it in emergency situations! It will also give you a way to clearly show your savings increasing. Its amazing how rewarding it is to see that balance growing!
6. Set up a direct debit
Set up a direct debit from your current account to your savings account and schedule it for right after you get paid. This will make sure the money gets transferred automatically to your savings account and you never get that urge to splash out. If you wait until the end of the month its more than likely the money won't be there to transfer.
7. Watch your savings grow
You've done all the hard work, now sit back and watch your savings grow!
This post is based on my idea of the concept of paying yourself first. It is how I started saving but you can do it in different ways. It is not just applicable to somebody who is starting saving in Ireland. If you want to read more there are lots of articles and literature based on this principle.
