The UK lockdown due to Covid-19 has been hard for many people – not just financially but mentally too. Often, what gets us through tough periods is being able to look forward to something: maybe it’s Christmas, or a family BBQ or that all important summer holiday. But with the current travel restrictions domestically, let alone internationally, it’s understandable that holidaying might just be out of the question this year. However, it doesn’t have to be all doom and gloom because it does mean you can save those extra pennies and have a fabulous holiday next year (and hopefully without taking any credit to do so!).
As holidays are a luxury, we can’t all afford them. Sometimes we have to save up first and then put the remaining balance on a credit card or take out finance with the holiday provider. But this isn’t always sensible because putting holidays and luxury purchases on credit cards usually means you have to pay interest and so the holiday becomes much more expensive than if you’d managed to save up first. So, how can you save up this year to have an interest-free holiday next year?
Saving Money
Saving money is always a sensible idea. While it can be tricky depending on your exact circumstances, if you try to save a little here and there, you’ll always be better protected against future financial difficulty – for example, if an unexpected bill arises. Sometimes, it can be much easier to save when you have an achievable target in mind, and some of these targets might include:
- managing your cashflow after an income shock
- covering unexpected bills
- affording luxury items like a holiday or Christmas presents
Saving to manage your cashflow
While you might want to book that dreamy holiday, you should first and foremost save a ‘rainy day’ fund to cover any sudden income shocks like unemployment. Ideally, you’d want to have a savings pot with about three months salary in. This is recommended as it means if you did lose your job or have to take unpaid leave for any length of time, you don’t need to stress about meeting your mortgage or rent payments and any utility bills because you will already have those covered. Rainy day funds help to relieve some of the pressure that comes with finding new work and preparing for interviews.
Saving three months’ worth of salary is not something that will happen overnight. This is a long term savings goal with quite a bit of commitment involved. However, it will help you face almost any future financial difficulty that could come your way. If you’re in a steady job, then this would be a great time to start saving any spare money each month, especially as lockdown means casual purchases are on hold right now. Alternatively, you might need to make a few budgetary adjustments to meet your target. In any case, you’ll always be better off if you have a healthy emergency savings pot behind you.
Saving to cover unexpected bills
Similarly to saving up for a rainy day fund, saving a bit of cash every week or month will also help in tackling those unexpected payments we all face throughout the year. Whether the washing machine has just packed up, or your pet has racked up a rather large vet bill, having the cash to deal with the payment rather than taking out a loan or putting the payment on a credit card will save you money in the long run.
Think about putting £20 or £30 away every week or month – whenever you get paid. This way, after about a year you could have over £350 to put towards unexpected payments. The more you save, the more you’ll be able to cover without first reaching for a loan. As you’ll be paying the bills with money you’ve earned rather than money you’ve borrowed, you won’t be subject to paying interest and charges either.
Saving to afford luxury items
Unfortunately, because things like holidays aren’t necessary for day to day life – although after a tough week at work it can certainly feel like it – you shouldn’t really book a holiday if you can’t afford it. This is why it’s a really good idea to save up for your holiday before you come to booking it.
While it can be tricky to find the cash to put towards a big payment, breaking it down into smaller achievable targets will help you feel like you’re actually reaching your goals. Break the holiday costs down into transport, accommodation, and spending money. Then, depending on how much you need for each category, you adjust the time frame accordingly.
For example, if your total budget was £600 and your travel costs £200, your accommodation costs £250 and your spending is £150, then if you save £50 a month you could break the payments into 4 months, 5 months and 3 months respectively. Then you can tick each section off and slowly your savings pile will grow and grow into that well deserved holiday.
Saving during lockdown
At the moment, saving any money at all might seem out of the question because of the financial uncertainty most of us are facing due to Covid-19 and things like furlough pay. While it’s tricky, it’s not impossible to save money on a reduced income. You just need to be really strict with how you handle your finances.
If you are furloughed, then you won’t be travelling to work or spending money on things like work lunches. Already, you’re saving money you would be spending on day to day costs. You only need to go to the shops once a week and so car fuel costs will also be reduced. While your income might not be as healthy as usual, because of the money you’re saving due to not participating in daily activities like a coffee before work or drinks in the pub on a Friday evening, your expenditure will also be reduced.
Once you’ve made your priority payments, you could save the rest of your disposable income for when lockdown is finally over – or when we are finally able to travel again. It’s going to be tough but putting the money away now when you can’t spend it on casual purchases will benefit you regardless of whether you’re saving for the worst case scenario or saving for the best.
