Don’t Walk The Financial Tightrope – Get Yourself A Balanced Savings Plan

*This is a guest post on creating a balanced savings plan

There are plenty of ways to save, including pension funds, ISAs, and traditional savings accounts. A fundamental principle of successful savings is not to place all your eggs in one basket. Instead, have a balanced savings plan to help you enjoy financial success.

Why Should You Have a Savings Plan?

It might seem reasonable to ask this question, especially when times are hard and cash is tight. However, money has a critical role to play in our lives regardless of the economic situation. Regularly putting just a little bit of money aside can help you cover the cost of planned events, small luxurious, or unplanned situations. In a nutshell, regularly saving will give you peace-of-mind and more financial security.

How Should You Save? 

Many people new to saving find it challenging to keep it going. However, if you follow a few simple principles, you will discover that saving is relatively straightforward:

Have Realistic Expectations for Your Savings Plan

The goals you set for your savings should belong to you. Everyone has different income levels, spending habits, and lifestyles. So, pick a savings goal that fits your life. If you try to match what someone else is saving, you could be setting yourself up for failure. Your saving goals must be realistic if you are not to become discouraged.

Save Little and Often 

This method of saving fits in with having realistic expectations. Rather than trying to put away large amounts, saving little and often will help you establish a good savings habit. Also, by saving this way, you will feel under less pressure, so will be more likely to persevere with your saving.

Become a Bit More Price Savvy

You will always be under pressure to spend. Online shopping, meals out with friends, or gifts for the family; there are always opportunities to separate yourself from your hard-earned cash.

However, becoming a little bit price-savvy can help you out. The rise of online shopping has also produced a simple way of finding bargains and discount vouchers. You can get great prices on pretty much everything by spending a little time doing savvy shopping and hunting out discounts.

Have Different Savings Pots

Managing your savings is easier if you segregate your saved cash into different pots. You might have a pot for an emergency fund, one for holidays, and another for your retirement fund. Shortly, we’ll discuss how best to save into these individual savings pots.

Follow The Pay Day Savings Rule

Having established your individual savings pots and decided upon how much you will put into each one, it’s now time to transfer your funds to these accounts. To ensure you have enough money to put into your pots, set up automatic payments to go out from your account as soon as your wages arrive in your bank account. Doing this will prioritise your savings over non-essential spending, and you’ll be more likely to keep to your spending goals.

Your Saving Pots

Having decided to split your savings into different pots, let’s look at what those pots should be and how to fill them.

Everyday Savings Pot

This pot is to cover your everyday expenses over a month, including utilities, food, commuting, etc. These are essential expenses you need to live, and you have to ensure you’ve got easy access to them. So, a current account is an ideal location to keep these funds. It’s worthwhile searching for an account that provides some interest. Any money you have left at the end of the month will at least have a small chance to grow.

You might choose to divide your Everyday pot into several sub-accounts such as a food account, travel account, daily expenses account, etc. Having these sub-accounts set up will help you maintain your budget, as you can easily monitor how much you have left in each account. Using these accounts for digital payments will also allow you to maximise discounts for paying by direct debits.

Short-term Savings Pot

A short-term savings pot is designed to enable you to save for a planned occasion such as a holiday, car purchase, large events, etc. As you don’t need immediate access to your funds, it makes sense for your Short-term Savings pot to be kept in a savings account. However, be aware that some savings accounts come with restrictions on how many withdrawals you can make. So, ensure you choose an account that gives you access to the funds you need.

Emergency Pot

Some people choose to combine this with their short-term savings pot. However, it may make sense to have a separate pot to cover emergencies. The size of this pot should be determined by how much you’d need to cover your living expenses for at least two to three months. You could also factor in the cost of car repairs or fixing a minor household disaster. 

Retirement Pot

Saving into a retirement pot is critical if you are to achieve the post-work lifestyle you desire. The good news about creating retirement funds is auto-enrolment in workplace pensions makes it straightforward to kick-off your retirement fund. A pension fund is the recommended vehicle in which to save your retirement pot.

If you are an employee over 22-years old and earn at least £10,000, you will automatically be enrolled in a workplace pension. Currently, 4% of your salary gets paid into your pension pot, and another 1% from the government in the form of tax relief. You can also choose to put more of your salary into your workplace pension. Your employer contributes a further 3% of your salary’s value, which is effectively free money. 

With the demise of final salary pension schemes, personal pensions are becoming essential. Final salary pensions are designed to pay you a monthly income on retirement for the remainder of your life. However, they are costly for companies to run, particularly with life expectancy rising. Final salary pension schemes are now few and far between, so workplace pensions provide the silver lining to the cloud of the final salary’s demise.

If you’re thinking about your pension, speak to a regulated adviser like Portafina or, view the guides at The Pensions Advisory Service.

The State Pension

The State Pension is currently £179.58 per week, giving a full annual pension of just over £9,000. You must have made NI contributions thirty-five years to qualify for full pension payments. 

Even if you qualify for the full pension, it may not be enough to sustain the lifestyle that you desire for your retirement. If you believe the State Pension will not be enough, you should seriously consider setting up a private pension.

When considering which private pension option to go with, you should be aware that not all pensions are the same. Some pensions come with low fees and are good performers. Others, unfortunately, are the opposite. So, it makes sense to check these things before making your choice. Also, conduct regular checks on your pension fund to ensure your charges have not risen, and your fund performs as you’d planned.

Do you have a savings plan?