You need a Balanced Savings Plan


The Law of Saving

Balanced Life



If you have a random savings plan, stop! Read on to discover why you need a balanced savings plan.

Current accounts, ISAs, pensions, or savings accounts, there is no shortage of ways for you to save your money. If you have started to do this, pat yourself on the back.

However, you should also ensure that your savings plan is balanced. This will allow you to enjoy your life today and prepare for your retirement when it comes.

Why should you save?

During challenging economic times, or when money is short, saving may be the least of your concerns. However, money plays an essential role in our lives.
Therefore, putting some money aside for a rainy day, special event, or emergency is an excellent idea. Knowing that you have such occurrences covered financially will give you greater peace of mind and contribute to you achieving financial freedom. Planning for your long term future is crucial; when considering your pension, take on expert advice from a specialist such as Portafina.

The best way to save your money

Saving may seem like a burden, particularly when there are so many great things to spend your money on. However, following a few fundamental principles will make saving more manageable, allowing you to develop a lasting savings habit.

1. Be realistic about what you can save.

Everybody has different levels of spending and income. Therefore, it doesnít make sense to match what other people are saving.

Setting unrealistic savings goals can be damaging in two ways. Firstly, if you donít achieve your goal, you will become demotivated. Secondly, your lack of motivation will lead you to give up on saving altogether.

2. Save a little and frequently.

This principle follows on from having a realistic savings goal. It is much better to save a little amount frequently than to try putting aside a large lump sum. Saving regular small amounts means there is less pressure on you, so you are less likely to become demotivated and more likely to stick with your savings plan.

3. Become a bit more stingy.

The pressure on you to spend money is considerable ó socialising, new clothes, the latest gadgets, or treating yourself and your family.

Doing these things is fine, but try and get the best deals possible. Use online comparison sites and search for vouchers to get discounts on as much as you can.

4. Establish separate money pots.

Establishing separate money pots for your various spending categories makes it easier to save. As a minimum, you should have a money pot for day-to-day spending, one for emergencies and another for your retirement savings. Weíll discuss money pots a bit further shortly.

5. Adopt the payday savings principle.

Once youíve established your various money pots, you can allocate a certain amount of money to each one. You should transfer the funds to each pot as soon as your salary arrives in your bank account. That way, you will not have it sitting around waiting to be spent on other things.

Your different money pots

Letís take a more detailed look at the different types of money pots you might have.

Day-to-day money pot.

In this pot, you could keep the money that will cover your regular monthly expenses, including food, utility bills, transport, and so on. You need to have immediate access to this money, so you should keep it in a current account.

You may decide to subdivide your day-to-day pot into several smaller pots. For instance, you could have an individual pot for food, another for utility bills, and a third for transport.

Setting up direct debits for regular payments is a good idea as it can often provide you with discounts. Cash or contactless payment is convenient for other daily expenses, so ensure you keep your money in an account that enables these.

Short-term savings money pot.

Itís a good idea to have a separate money pot to save for larger items, such as household appliances, holidays, or significant social events. A regular savings account is an excellent place to keep these funds, as you will accrue some interest.

However, you should be aware that some such accounts have restricted access. Therefore, if you feel you might need your money quickly, you might have to place these funds elsewhere.

Emergency pot.

Although some people tend to incorporate this into the short-term savings pot, keeping them separate is a good idea. The funds in this part are used to cover any unexpected event or emergency, such as car repairs, appliances breaking down, or unexpected medical expenses.

Your emergency pot should be sufficient to cover at least two months of living expenses. However, it may take you some time to accrue these funds, so do not worry that you donít have them straight away.

Retirement pot.

For most people, their retirement pot consists of a pension plan. The good news is that you are likely to have one of these already, if not more. If you are over 22, employed, and earning more than £10,000 per year, you will be enrolled in a workplace pension scheme.

You contribute 4% of your gross salary into your workplace pension pot. A further 1% boosts these contributions through government tax relief. Your employer also contributes at least 3% of your total salaryís value.

Your retirement pot also includes your State Pension contributions, paid through national insurance. The current full State Pension is £9339.20 per year, or £179.60 weekly. If you have no other form of retirement savings, you should seriously consider whether the State Pension will be sufficient to sustain your retirement.

If not, you should look to supplement it with a personal pension. These are becoming increasingly crucial for retirement as final salary pension schemes decline.

Although final salary schemes were seen as the gold standard of pensions, they were costly to run. Therefore, they have been phased out in all but a few circumstances.

If you are setting up a private pension, you should know that not all personal pensions are equal. Some come with low charges and perform well, while others may underperform and sting you for high fees.

Therefore, you should regularly check your pension to see how it performs and ensure that your pension charges have not risen too sharply. If they have, you may find that your precious pension funds are being eroded and not growing in the way you had anticipated for your retirement.


The fact that youíve started saving is excellent. If you havenít already done so, you should start saving right away. Also, you should now be aware of the importance of having a balanced savings plan. Having one will allow you to enjoy today while preparing for tomorrow.

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