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The power of automating your savings

Automating your savings is all about paying your future self first. By automating your savings it enables you to achieve your goals more constantly and with less resistance. Making saving feel like part of your monthly expenses rather than a last-minute thought on the 30th of each month - scrambling to get to gather the last bits of your paycheque to move over to a savings account.

The first steps to setting up a savings plan, and starting out on automating yours savings is creating a budget. This will allow you to set a percentage of your income you want to save and how much buffer (miscellaneous spending) money you need each month. This may take some trial and error for you to find out how much you can comfortably put away in savings automatically every month without having to later withdraw it that month for regular spending. 



Easy ways to automate your savings 


Make use of employer savings plans 

Most employers will have some for of retirement savings plan. For those readers in the UK you will probably have been "auto-enrolled" onto an employer pension/ retirement plan. The perk of these sort of plans is that you never see the money. Eliminating the temptation to spend it and adjusting your mentality about it. 
Saving 10-15% of your salary into your pension (taking into account matches) is a great place to start and depending on where you live there may be tax benefits for paying into your pension straight out of your salary: pre-tax (known as relief at source).

Set up regular deposits for pay-day.

Making use of your banks standing order feature you can set up regular amounts into your savings accounts. If you don't already have an emergency fund of 6 months' expenses this is the place to start. But once this is funded make use of multiple savings accounts to ear marked for different goals. Setting up sinking funds for expenses which you know will come up (car service, a new room etc) will help you be prepared for whatever life throws at you. What feels to be quite small contributions can quickly add up to a health savings pot through the power of compound interest. 

Make us of account auto-saving services

Some banks such as Lloyds "Save the Change" service allows you to opt into having your account round up expenses and save the change into a savings account. What might feel like small change, merely pennies, is siphoned off into an account at a rate you are unlikely to even notice.  Many other banks offer similar services (or you could even do it manually at the end of each day adjust your account down to a round figure). There are also some great apps out there for automatic savings such as Plum which use tech to figure out the optimal savings for you. 

Save your tax return /rebate

Even in countries which automate taxation tax returns are quite common. Consider this - you have managed to live without this money up until now. Throw it direct into your savings account and you'll have been effectively autosaving the whole of the tax year (though you may also want to look into getting your tax returns sorted to reduce  the rebate  - don't give the government free money!)

Do an end of month account sweep 

Your budget should include some buffer money that does not form part of your start-of-the-month automated savings plan. This is to allow you to get through the month when some expenses are greater than usual without having to dip into your emergency fund (which is for emergencies only!) or other sinking funds. However, you may not need to use all your buffer money or may be under budget in other areas in a month. At the end of the month - just before your next pay cheque comes in now is the time to do an "end-of-month account sweep". Take that money and deposit it into a savings account and start the new month afresh. 


How are you achieving your savings goals through automating savings?



Our house buying journey



We've been pretty absent in 2018, but we have some exciting news we've bought a house!!  We've definitely learned a lot already through this process as first-time buyers but also have a lot to learn and plan to share our home renovations works on here too.

We had thought we might have to wait a couple more years to buy (mostly because C was still studying). However, in the summer we C got offered his dream 'grad' job without having finished school on the proviso he carry on studying online.  In November we got told that he would be passing his probation (yay) and that would come into effect in December. At that point we started looking at getting an agreement in principle from some hughstreet banks to see how much we could borrow. 

This was our first stumbling block ... so many of the high-street banks were not keen on lending to us because I had a fixed term contract or because Chris was a recent employee. We started to get quite disheartened that we might not be able to buy after all. However, speaking to a friend at work (who was also on the same contract) he recommended an amazing mortgage broker (email us for his details). The broker knew exactly which high-street bank would be okay with us having a fixed term contract. A couple of days later and we had an agreement in principle.

THE SEARCH 


At that point it was time to start properly looking at houses. We had been keeping an eye on property prices for the past 6 months and had a good idea of the area we wanted to buy in. Being Londoners I biggest priorities were being close to a good train station, reasonable house prices, an upstairs bathroom (which in this parts of is hard to find) and decent schools. 

We narrowed our search to houses within 0.5 miles of either East Croydon, West Croydon or Norwood Junction stations. For a two bed house in those areas the prices are between £350,000 and £425,000. 

The first house we went to view was near east croydon station, it was a lovely victorian terraced house with two beds, upstairs bathroom and a decent sized garden. However, it felt very dark and boxy and overpriced!! 

The second house we saw (which we ultimately put an offer in on) was also victorian terrace but it had considerable work done on it downstairs turning the lounge, kitchen, diner into a single open plan room with a stylish spiral staircase upstairs. We knew as soon as we stepped in it was the house for us. There is certainly work that needs doing and we plan on converting the loft to turn it into a 3 or 4 bed house. 

The third house we saw was a larger 3 bed house that was 1960s style. It was a good foundation but needed a LOT of work, far more than we have the capacity at the moment. We were particularly concerned about the presence of damp all over the property. It presently had tenants who had not taken good care of the property and overall we felt that it was not the right kind of purchase for us at the moment. In a way we were really appreciative to meet the tenants when viewing because that gave us a good indication of how they had kept the house and also what the existing owner had been like as a landlord. 

Having mulled our viewings over we decided to put an offer in on the house in late December. After some negotiation we managed to agree a price much lower than the original listing price of £410k. 

GETTING A MORTGAGE


Although we had an agreement in principle this does not bind the bank to offer you anything. We had been working surer hard to get our credit scores high in time for buying the house and at this point C had a 999 credit score !! Our amazing broker got the mortgage application off in a flash and we were able to do everything electronically (we've never stepped foot in the bank). 

Once the application is off the bank have to go to the property to view it and make sure it is of the value you are borrowing for (and that it isn't of non-standard construction). Some banks will charge a fee for this but not all so it is worth shopping around. We opted to have an extra homebuyers survey done at the same time which set us back by about £350. We heard back  a few days later that the property value was all fine and about a week later with the survey. We then went through the survey for all the things that had been flagged up so that we could mention them to the solicitor and have them resolved. 

Just before Christmas we got the news the our mortgage had been approved for the amount we needed !! It was around this time we discovered that the home-owners were part exchanging with the builders they were buying their new build off. What we hadn't appreciated it how pushy and aggressive these companies get. We received a letter stating that we had agreed to exchange in January and complete in February and that if we did not sign the contract within 4 weeks of receipt they would put the property back on the market!! 

In January we received a copy of the contract. We also realised that we hadn't had our Lifetime ISAs open a year (which they have to be at the point of exchange to use the money) both of our ISAs hit the year mark in February so we knew we were going to have to wait until then before we could exchange. We spent most of January and February getting the solicitor to ask questions about the property (our solicitor was VERY slow).

As soon as the 22nd Feb hit when C's ISA hit its year (mine hit its year earlier in the month) we started pushing hard for her to chase up the money with the bank. The vendors wanting to move on the 11th (and us happy to move on that date) the only hold up was our solicitor getting the money from the bank.

EXCHANGE AND COMPLETION 


Skipton (who our LISAs were with) were not fab and gave us lots of conflicting information about whether or not our requests for withdrawal had actually been put in. Our solicitor insisted on waiting until the LISA money was in before exchanging so this unfortunately held things up. Finally the funds came through on the 8th March and we exchanged.

After exchange was all rather a blur as we completed the following Thursday. It basically involved no work from our part beyond organising a removals van. We went for Aussie Removals who were okay (but not as great as the amazing removers we had moving up to London from Brighton). It didn't help that I accidentally said the lift was 10 meters from the flat rather than the 100 it was. But in the end it all worked out fine - having spent much of the previous day moving boxes and bits & bobs over ourselves. After all the stress of moving, using an online invite/announcement service is a great way to share your exciting news. Paperless Post  has tonnes of cute designs perfect for your moving announcement without the hassle of traipsing to the post office.



We definitely learnt a lot through this experience and will be sharing a few tips and tricks (and things we wished we had done) on the blogs. We are also looking forward to sharing our journey to becoming mortgage free as we enter this new stage of life. Along with fun DIY tips and our good ole personal finance posts.

Comment below what posts you would like to see on the blog soon. 





ISA Deadline: a last minute guide to ISAs

The tax year is almost at a close (5th April is the D-Day). If you haven't already opened a ISA now is the time to do so!! (We're serious make the most on the next month to get your tax free savings in tip-top shape).



Here's our last minute guide to all things ISA

Total allowance for adults £20,000 this can be distributed across cash, stocks and shares and innovative finance ISAs.

ISAs are tax free savings accounts, this means you pay no income or Capital Gains Tax on the money invested. Each year you have an allowance which allows a contribution of this much per year (the amount you contribute is the same, regardless of whether or not you make any withdrawals).

Cash ISAs

  • Includes Help2Buy and some lifetime ISAs
  • Money is held as cash in an account like a usual savings account
  • Can come in easy access or tied-up (fixed) accounts. 
  • Various interest rates but all are quite low at the moment. 

At this stage we would not encourage you to open a Help 2 Buy because it is based on regular monthly contributions and so you can't put in a last minute bulk of money.

Why choose a Lifetime ISA?

Lifetime ISAs are good for those who:

  • Don't necessarily want to save on a regular basis
  • Want to save more than £200 per month (or £2400 per year)
  • Willing to save £4000 or less in the ISA
  • Haven't contributed to another cash Isa this tax year
  • Are looking to save for a house (N.B they can be used for a retirement but we'll share in another post why this is a BAD idea). 
  • looking to buy a house anywhere in the UK up to £450,000
  • are a first time buyer
  • want to take advantage of some awesome government bonus
In fact we wrote a whole post about whether or not a Lifetime ISA is for you

For those looking to buy in the next 5 years or so a cash version is buy far the best option due to the fact that investment in stocks and shares should always form part of the long-term investment aspect of your portfolio. 

Currently Skipton are the only provider offering the cash version and it seems exceptionally unlikely that any of the big banks are going to open in time for the end of the tax year. It is offered with a 0.75% interest rate. Whilst considerably less than the Help-2-buy ISA is worth it due to the increased potential bonus (in our opinion). As always the Skipton ISA is covered by the FSCS scheme which means your money is protected in the case the bank goes into liquidation (this is not the case for the stocks and shares lifetime ISA and thus your capital is always at risk). 

We have tested out the Skipton account for ourselves and have been really impressed by the quality of customer service. The only downside we have found is the potential for branches to be quite sparse depending on where you live (here in Brighton our nearest branch is almost an hour away). However, you should be able most of the banking online. 


Best Cash ISA Rates
  • Best fixed ISA - Paragon 5 years 1.9%
  • Best "easy access" ISA- Nationwide 1.4% (but only allowed one withdrawal a year) 
  • Best easy access ISA- Virgin 1.16%

Junior ISA

These replace the old style child-trust funds and allow for tax free savings of up to £4128 per year per child. You might think "but my child doesn't earn enough to pay tax" and you'd probably be right but when your child turns 18 any money in the junior ISA gets transferred into an adult ISA. This means if you saved at the current allowance at the best rate available (see below) your child at age 18 could have over £100,000 in savings !!

Currently Coventry Building Society has the best rate at 3.5% interest for a cash ISA (junior ISAs can also be stocks and shares). 

Stocks and Shares/ Innovative finance ISAs
  • These ISAs have the potential for much greater returns that the current low rates available for cash ISAs.
  • However, they are also associated with much higher levels of risk.
  • Making an last-minute rushed investment decision is not a good idea and we would therefore no recommend at this stage of the tax year opening up one of these ISAs 
  • You are much better off putting the money in an easy-access cash ISA and transferring it at a later date once you are clear what your risk appetite and investment goals are. 
Our biggest tip is don't delay, all financial providers are very busy at the moment and things make take longer than usual. 

Creating a super savings plan

If as Dave Ramsey says "personal finance is 80% behaviour" then changing that behaviour is central to your success. Creating a super savings plan will provide you with the tools you need to achieve your financial goals. 



First of what is a savings/plan goal?
While your budget takes care of your monthly expenses a savings plan take a more long term view, whilst it is connected to how you budget it is essentially deicing how much you are going to set aside, to save for a specific purpose. 



How to create a successful savings plan?


Budget Mastery
Central to saving success is having control on your budget. If you are not already doing so, taking the time each and every month to go over the previous months spending, looking at where change can be made, and praising yourself for your successes, before moving on to making a plan for the coming month. Once you have managed to wrestle your budget under control you will be in a better position to see how much money you actually have available each and every month to contribute to your savings plan. 

You might find that you are budgeting, but yet there is not money spare to contribute to savings. There are two ways to tackle this, either by reducing expenditure or increasing your income (or a combination of both). By having a solid grasp of your budget you will be able to easily identify where you are spending your money, and in turn where you can make cutbacks. 

Earn More, Spend Less
There will be expenses, essentials which it will not be possible to cut down spending. It is worthwhile separating expenses into two categories, essential and non-essential. Then rank those non-essentials in order of importance. Know you know which of your non-essential expenses is least important to you, this is where you will start making cutbacks, progressively working up the list of importance until you are able to cut back the amount you want to contribute to your savings goal. 

The alternative is to increase you income, there are lots of ways to add additional income beyond simply picking up as second job , we have plenty of them on our site that work around busy schedules so be sure to check out all your options. 

Goal Setting 
Setting goals is very important but setting goals in the right manner is the key to achieving them. You might remember as a child SMART goals, a principle of goal setting that increases you success rate. 

This means that these goals must be:
- Specific
- Measurable
- Attainable
- Relevant
- Time 

An example could be "I am going to save £50 a month, towards my car maintenance sinking fund, for 12 months". 

Lets break down this goal
- It is specific, it is for the purpose of a sinking fund. We know where the money is going and what it will be used for. 
- It is measurable by the set amount each month, rather than "I'll just save a bit each month".
- It is attainable because it is not a huge amount to contribute each month, though of course, this should assessed in light of your budget. 
- It is relevant to the needs of car ownership.
- It is time specific, only for the duration of 12 months. 

Accountability 
Now you've determined your SMART savings goal, it is important to write out your plan for success. Maybe even consider filling out a chart where you colour in as you make progress such as these ones.  Share your goals with others for added accountability. 


What are your savings goals at the moment? 

Hiring a car with a debit card

Here at Saving Scotts were big advocates of living a debt free lifestyle. When we paid of the credit card for good almost two years ago, we also decided to cut up the card and enjoy life without that temptation.

Whilst using a credit card wisely, paying it off every month, is great for building a credit score for a mortgage. We knew as Chris was only just starting university at this point that would be a while away. We instead decided we would get a card after I finish my masters (and start full-time employment or a funded PhD). So until then we live debit only (or cash). 


car hire debit card


Up until a couple of months ago, we have had no issues living debit only. We have been travelling, hired cars abroad, even paid £1000s in tuition for my masters. However, hiring a car in the UK saw us run into a bit of challenge, credit card requirements, in the name of the driver. As far as we understand the desire for hire companies to have a credit (rather than debit) stems from the fact that if you cause damage or steal the car they can charge it to the credit card (also it is easier to put money on hold for the deposit). 

It took some time but we finally found some car hire companies that allow you to pay on the debit card only. Many will require a refundable deposit (similar to the holding fee on a credit card) so be prepared to put some money aside, and contact the hire company if you are not sure how much you need to put aside.


Whilst they may not be the cheapest companies out there, it is worth shopping around between those who allow debit cards to find the best option for your needs. None of them accept pre-paid debit cards or international debit cards, so you will have to look for an alternative solution if that affects you.

Sixt
Allow hire on a UK debit card (in the driver's name) with a £250 deposit + the cost of the hire. This means if you pay for the cost of the hire upfront (which is always the cheapest option), you only need to set aside £250 for the deposit. See link to further info

Enterprise
Allow debit card only hire but it is a bit more of a tricky process.
They too require a deposit between £200 and £400 and this must be made on a card in the drivers name. 
They also require additional security checks when you pay by debit card. This is what enterprise had to say about the checks when we enquired. 

If the driver choses to use a Debit card in their name then we do perform an additional security check as we deem this payment method a less secure method than a Credit card. This check that is performed to every Debit card paying customer across the UK checks the person, their personal details against their address. It is checking if they have 3 connections to that address. By connections it checks electoral register, mortgage payments, utility bill payments & other payments in their name at that address. To qualify to rent with ourselves that renter must have at least 3 connections as described above to that address. If this is not the case and they cannot pay on a Credit card then unfortunately we are unable to rent to that individual. This is done as an insurance underwriting tool to securely protect our asset.


EasiRent
Easement require a return ticket and a priced deposit (may vary at location but around the £200 mark, worth checking with them before booking). They do require you to take the full-comp coverage if you are paying on debit only so you won't be able to get the cheapest prices available on their site. But they are still pretty competitive, but their customer service can be less than satisfactory. 

Have you hired a car using a debit card only? Who did you hire with? 


*Part of Financially Savvy Saturdays on brokeGIRLrich.*