It’s common to feel as though you’ve heard it all before when it comes to some of the time-tested financial advice, such as the significance of saving, creating a budget, and borrowing prudently. But given how many of us are being tested by the present financial crisis, it is helpful to return to the fundamentals.
Thankfully, some strategies can be helpful, including regular Zoom money discussions with friends and financial applications that use the “Couch to 5K” concept of saving.
Here are some alternative strategies to help you develop financial resilience instead of relying on high street bank products.
How to budget & save efficiently?
Find an accountability partner
If we have someone beside us, staying motivated to complete tasks that we find unpleasant since we don’t want to disappoint them or break a promise is simpler.
Use this strategy for budgeting and financial administration, suggests Stacey Lowman, a money coach for Claro, a digital coaching app. She started free Friday finance sessions on Zoom during the lockdown. A group would show up and introduce what they needed to concentrate on, occasionally after Lowman had asked them about their largest financial concern. After that, they would each utilize the Pomodoro approach to focus on administrative tasks they needed to complete—paying bills, filling up spending spreadsheets, moving banks—for 25 minutes at a time.
According to Lowman, she often found that folks tend to put off those minor practical money problems. A designated location can make a difference, especially for the financially pressured. She added that you could decide to deal with it in Friday’s session if you wake up and realize that you neglected to do something.
With a friend or group of pals, you might organize something similar, like a money management version of a reading group. Use a website like Focusmate, which connects you with someone online who is motivated to focus and get things done without interruption.
In-person accountability sessions have been developed by Emilie Bellet, the founder of the women’s financial network Vestpod, in London, Hove, and Manchester. Her money “pods” provide a forum for knowledge exchange and a way to connect with an interested listener to discuss anything in greater detail.
Debt management, budgeting, pensions, commencing the investing process, finances if you are a freelancer, bargaining, and feelings related to money are among the subjects discussed.
Bellet believes that it might be challenging to maintain motivation when it comes to our finances. There are moments when we are completely clueless and afraid of where to begin. Having each other as role models and sharing responsibility makes managing money so much simpler.
Jess Rad, the founder of the WomenHood and a resident of Brighton, attended a Vestpod meeting where about 35 women gathered to discuss personal finance. It opened my eyes to how infrequently we do that, adds Rad. “This isn’t your typical chat. Even though you have tight relationships with your family and friends, this does not guarantee that you can be honest with them. We occasionally require others outside our networks to create that,” she added.
Save before your salary is credited
Unaffordability prevents us from creating a safety net of monetary savings, too. We frequently put things off because we procrastinate or lack the knowledge of where to begin. The success of auto-enrolment as a means of retirement savings served as a demonstration of this. People are more likely to continue with a workplace pension when they don’t have to think about it too much.
The National Employment Savings Trust Insight team uses the same “nudge” approach when it comes to savings because a sizeable fraction of employees who are contributing sizable sums to their pensions have little to no money left aside for unexpected expenses.
The recycling and waste management company Suez has been testing automated payroll savings with its employees. Before a worker is paid, £40 of their salary is sent each month into a readily available cash savings account. They can increase or decrease the preset sum.
Only 6% of employees signed up for the previous opt-in workplace savings program. That has increased to more than 40% since it became an opt-out system.
According to Jo Phillips, director of research and innovation at Nest Insight, “our research reveals that inertia, people’s tendency to keep doing what they’re already doing, is a big obstacle to involvement.”
Although the opt-out payroll savings model has not yet gained much traction, you might ask your HR department to consider the idea.
Additionally, Phillips advises workers to inquire about any payroll savings options offered by their employer. Even in places where programs are in existence, she continues, “knowledge of what is available can be minimal.”
Take part in a savings challenge
Start your nudges by accepting a savings challenge. These usually entail routinely setting aside tiny sums with the intention of not feeling the brunt of saving at one go.
The 1p challenge will net you £650 over a year if you save 1p on day one and increase that amount daily to £3.65 on day 365. Users of the MoneySavingExpert website frequently go online and announce that they are signing up, demonstrating its popularity.
By the end of the 365-day challenge, which begins with weekly resets of £1 on Monday, £2 on Tuesday, £7 on Sunday, and so forth, you will have invested a total of almost £1,500.
Performing this can take a lot of time, but if you’re a Monzo customer, you can automate the procedure with the IFTTT app.
According to Monzo, 28,000 customers saved £17.7 million in 2021 (an average of £630 per client), and many used IFTTT to become debt-free for the first time.
You may create “applets”—instructions that send money to savings accounts—by connecting your Monzo current account to more than 500 different internet services, like your calendar, Twitter, Strava, and the weather app. Every time your weather app forecasts rainfall, for instance, you might decide to transfer £10 from your current account to a rainy day fund. You could also transfer £1 for every 1km you cycle or run and log on to Strava. After putting it in place, nothing else needs to be done.
The AI-powered app Chip analyses your bank account to determine how much you can save. The average Chip customer theoretically automatically saves £3,000 every year, never quite enough to noticeably deplete your bank account but just enough to mount up. When you are paid, its paycheck put away feature automatically transfers money into a savings account.
To test out new banks, use an online marketplace.
The best interest rates are frequently offered by challenger banks or other financial institutions that you might not be familiar with.
You may find them via savings sites like Raisin UK, Active Savings from Hargreaves Lansdown, and Cash Savings Hub from AJ Bell. With sign-up incentives and exclusive deals, they enable you to open many savings accounts with non-mainstream banks without having to complete different paperwork for each one and manage them all through a single online site.
The Financial Services Compensation Scheme covers all cash savings so that up to £85,000 is shielded against a bank’s financial collapse. The platforms often provide a combination of notification accounts, easy access accounts, and fixed-rate savings bonds. The drawbacks include the omission of cash Isas and the incomplete display of all available accounts.
In contrast, the budgeting software HyperJar has a function that would give you a 4.8 percent return on your savings if you agree to spend every penny at a partner store like Welsh Water, Tui, Dyson, or ATG Tickets.
How can you borrow in a pinch?
For millennia, friends and relatives have formed lending groups outside of the banking system, from a menage in Scotland to a stokvel in South Africa, committees in Pakistan to partners in the Caribbean.
All of them have a similar structure: one organizer gathers a group, each participant contributes a predetermined amount regularly, such as £100 per month, and then everyone alternates in taking out the saved money. If ten people each saved £100 per month for ten months, one person would have a lump sum of £1,000 each month. It’s a strategy to make you save regularly while helping the people you care about, even if you finish last.
Young people who have seen their parents use money circles are now aware of the advantages of banding together to raise funds for things like down payments on homes.
The rotating savings and credit associations, a type of community scheme, are something Nina Mohanty, a co-founder of Bloom Money, wants to digitize more. “My mother is a Taiwanese immigrant, and my father is an Indian immigrant, so we all grew up in these circles,” says Mohanty. To keep track of who has contributed and whose turn it is to draw from the pot, the circles are still commonly run with cash and a notepad.