Many individuals find it difficult to save money, either for a specific purpose such as retirement, or simply to grow their assets, because of their financial circumstances.
Often this is down to having to balance conflicting priorities, and facing circumstances where saving money comes below other household costs in terms of necessity.
According to Moneyfarm, we save an average of £105.43 each month. Quite understandably, this figure varies significantly depending on your income level.
A Finder report revealed that the average person in the UK has £17,773 in total savings, but half of people have less than £1,000. Furthermore, almost a quarter of people have no savings whatsoever.
Perhaps predictably, age can be a key factor in the amount you have saved. Moneyfarm confirm that people under the age of 25 have, on average, a little more than £2,500 in savings, while the corresponding figure for those over age 55 is £35,607.
However, as well as age and earnings, a recent CNBC report in the US reveals that how effective you are as a saver may also come down to a series of behavioural traits.
Discover what these traits are, and how adopting them yourself could help you turn into a super-saver, with all the financial advantages that will give you.
1. Staying positive, to the point of over-optimism
When it comes to retirement planning and saving for your future, maintaining a positive outlook can be invaluable in helping you deal with adverse circumstances and stay on track.
While simply saving money in an interest-bearing account can be a short-term undertaking, investing in stocks and shares should very much be for the long term. Likewise, your overall financial outlook should be measured in years and decades rather than weeks or months.
The CNBC research you read about earlier, found that a tendency to overestimate the probability of positive news, and having a general perception that things are actually better than they are could help improve retirement preparedness.
This means that if you are confident about future events, you might find it easier to save and invest for them.
2. Having clearly defined financial goals and objectives
One key trait you should make every effort to adopt, because it’s arguably the most important of the five you will read about here, is understanding the importance of knowing where you want to get to and how you’re going to get there.
Having that kind of single-minded purpose will make it far easier to achieve your goals. This can apply to specific events such as retirement, but also short-term objectives such as holidays, and buying a new car.
In my experience, if you have this trait, you will be far more likely to have smart spending, saving, and money management skills.
In order to secure your financial future, you need to have a robust and effective plan in place. You also need to review it regularly to ensure you’re on track and it’s still fit for purpose.
This will mean that when it comes to the question that can define your attitude to financial planning, “am I going to be ok?”, the answer will always be in the affirmative.
3. Understanding money, and how savings work
As a professional adviser, my role is to guide you through different investment strategies and ensure you have a robust plan in place to help you secure the financial future you deserve.
One thing I have discovered over the years is that clients who have at least a basic understanding of some of the key investment concepts can often end up with greater financial rewards than those who struggle to understand or appreciate them.
Three of the most important areas it can help to understand include:
- The magic power of compounding
- How dividends can help you grow your wealth
- The importance of investing for the long term.
The good news is that you can acquire this knowledge over time. Gaining it will ensure you will exhibit positive behaviours when it comes to saving and investing.
4. Being aware of the concept of risk v reward
One truism that I’ll often talk about with clients is based around the fact that – in the long term – the more risk you’re prepared to accept when it comes to investing your money, the greater your ultimate financial rewards.
Often this will come down to behavioural attitudes, rather than any detailed understanding of investment markets and returns.
You will often have the choice of focusing on your ultimate achievement, or simply basing your investment strategy on your security and protection.
While the two can, and do, coexist, if you’re prepared to take proactive steps with your financial preparation, you’ll be in a far better position financially to reap the rewards of an effective strategy than if your investments are based around defensiveness and simply protecting what you have.
In short, you need to be able to speculate to accumulate, and accept an inevitable element of risk.
The alternative mentality of risk avoidance is not nearly as effective when it comes to attaining your financial goals.
5. Being financially disciplined and staying in control
It’s inevitable that you’ll face a series of financial challenges throughout your life.
Commitments such as a mortgage, saving for your retirement, and family events such as marriage and the arrival of children, are all likely to need addressing at some stage.
One of the keys to being able to balance maintaining your current lifestyle with saving for your future goals can come down to how disciplined you are with your money.
Having a clear idea of your income and expenditure, as well as a decent awareness of both short- and longer-term commitments, will give you a great chance of managing your financial priorities effectively.
It will mean, for example, that if you can keep your debt to a minimum, it will make saving that much easier.
Get in touch
If you’d like to talk through any of the issues you’ve read about here, then please get in touch.
You can call me on 07769 156 250.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Pension income could also be affected by interest rates at the time benefits are taken.
This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.