With the summer already upon us and travel back/summer socials in full swing, many people will be making plans for the summer season. However, with the cost-of-living crisis very much here, many are reassessing their finances and tightening their purse strings as they grapple with rising food and energy bills. It’s important that you continue to live within your means and, if possible, keep up positive savings habits. Emma Watson, Head of Financial Planning at Rathbone Investment Management, shares her five top tips on budgeting for this summer and beyond.
The starting point is always: ‘What is important to me?’ Once you understand what matters to you, everything falls into place and you’ll be able to budget much more easily. Think about all that you’d like to do for the summer and consider if it fits into your budget. If not, you might have to cut back or find cheaper options. You might, for example, decide that you would rather have one big holiday away rather than several smaller day trips or vice versa. Also, thinking about how you would feel if you don’t get to carry out your plans can be a good motivator.
Calculate your expenses
Impulse purchases can be fun at the time but aren’t helpful if you’re trying to stick to a budget! Whether you prefer apps or a notebook, noting down how much you plan to spend will help you keep to your budget and not succumb to the urge to splurge. Breaking down your expenditure into smaller chunks is useful as you won’t spend all your budget in one go. Also, work out what essential spending you have each month (mortgage/rent, food, household bills, etc) and what monthly discretionary spending you have (eating out, streaming services, gym membership, etc). Cutting back on short-term discretionary spending is a great way of saving for a longer-term goal.
Separate your spending money from your day-to-day bank account
Having a separate bank account from your day-to-day expenditure sets a clear divide between your summer budget and your daily expenses. Setting up direct debits for essential bills to be paid on payday could give peace of mind that anything left can be used for discretionary spending.
Check your bank statements
A good way to keep tabs on your expenses is to keep track of your purchases. With online banking, and many banking apps now categorising spending, it’s even easier to identify non-essential spending and cut back. A good way to assess how on top of your day-to-day spending you are is to mentally estimate your current account balance before checking, many of us underestimate how much we spend!
Continue to save for the long term
Whether it’s saving to get on the property ladder, for a wedding or for your retirement, it’s important to remember to keep saving for your longer-term goals. Making regular contributions towards your savings nest egg, if you’re able to, will help you achieve your aspirations faster.
With inflation burning through cash and making holes in pockets, looking into investing can be beneficial if you have savings that don’t need to be accessed immediately and you can afford to do so. Before you start investing, establish how much savings you need to keep in cash for shorter-term priorities and how much you’re willing to put away. As a general rule of thumb, any money you invest should remain invested for a minimum of five years, and remember the value of your investments and the income from them may go down as well as up, and you could get back less than you invested.
As part of this, ensure you are also putting money into your pension. The earlier you can begin saving for retirement, the better prepared you will be. Seeking guidance from an adviser will help you to ascertain what your investment strategy should be by considering factors such as your financial goals and attitude to risk.
By Emma Watson, Head of Financial Planning & Advisory Services at Rathbone Investment Management
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