Savings

[UnaCorda]

It seems that very few people have a financial cushion of any sort and I'm curious as to why this is. I understand that some people are on a low/minimum wage or perhaps have unexpected outgoings, but there must be a lot of people to whom this doesn't apply.

Is it simply a matter of priorities? Is the cost of living simply too high to allow most people to save? Or do most people just spend most of their salary every month, regardless of any pay rise?

Or am I wrong and most middle-income or high earners do have a decent amount put away for the proverbial rainy day?

Disclaimer: I'm not asking this from the position of having a six-figure salary (or even a particularly high five-figure one) or a high-earning husband or a trust fund, etc.

Also, obviously people's financial situation could be completely different at the moment, so I suppose I'm referring to a pre-Covid situation.

For most of my adult life, my wage has been equal to my outgoings. Nothing left to save.

By outgoings I mean bills and living expenses. No holidays, no luxuries. Just normal life with nothing to spare.

That’s why until recently, savings were a pipe dream.

Everyone's situation is different, but if you earn above the national average you should really have a rainy day fund, if not then you have over stretched your finances somewhere even if being recently furloughed on 80%, generally you should have around 6 months living expenses ready for the unexpected, if low wage then that will most likely be impossible due to cost of living.

I have just used up all my savings to buy a house so I have none left. I'm starting from scratch again now. My income is about £24k a year but that includes child maintenance - I'm a single parent. I live in a cheap area so I can afford to put some aside but I can't afford to pay into a private pension as well - my aim is to pay off the mortgage then life frugally when I'm older.

Earn way above national average and never have a penny in savings

Instead overpay hugely on mortgage

But it's not accessible so not savings

Covid halved our income in a way that nothing except actual death would so ended up with a 7k overdraft until we could stop overpaying the mortgage - they took 3 months to answer the phone because of all the people who had to have an actual mortgage holiday

So now 7k in debt which we couldn't prevent, now paying it off much slower than it accrued due to income not recovering yet

What do you actually really want to know @UnaCorda ? Or is this gawp at the poor day?

Think it really comes down to individual circumstances and living expenses/spending style.I keep my outgoings quite low, so no cable t.v, cheap internet and sim contract, most of my furniture including flooring is 2nd hand including t.v etc. I am a low income earner and can save around 2k a year but naturally I spend around half the next year on whatever I need or want e.g expensive laptop or car insurance/other car needs, doing the garden or small house projects. I waited 2 yrs before deciding to buy the swanky laptop(cheap one I bought couldn't meet my needs and finally got fed up) and even then paid half and got a no interest payment plan for the rest so I still have some saving left over for whatever.

So my savings fluctuate, if I spent the money as when I had it then it would be the same but no savings, I essentially delay whatever I want or need without skinting myself from monthly income.

Saving for longterm but not nearly as much as the shorterm.

For most people, it’s simply because they are spending everything on day to day needs. Those that have a disposable income to be able to save fall into two categories - no scientific evidence for this, just my opinion. First are those who prefer the live now, save later approach, not forgoing anything they see or want. Fair enough, it’s their money. Second group is the one who simply aren’t financially savvy and are unintentionally wasting money. For instance, those that don’t understand financial planning, interest payments, switching mortgages, insurance, investing etc.

Because our outgoings on bills and essentials swallow up all our pay. No big house, flashy cars, fancy holidays either. It can’t be that hard to work our surely?

I'm on a pretty low income. I try and live frugally and manage to save a bit to give me a little cushion but never more than a couple of thousand and then it needs to be spend...new windows, broken washing machine that type of thing. But I guess that's what it's for! I used a 0% credit card once to buy a new kitchen and found it quite stressful keeping up the payments, so I prefer to do it this way now if I can

The thing with savings is you sometimes need to use them. House repair, car breaks down, washing machine conks out. That what they are there for. Then you have to start again. So there will be a time when you have very little saved.

And sometimes theres not much left to save so you cant build up the cushion.

I'm going to try to teach my DC the importance of saving. I've lost jobs in the past and been lucky to have enough savings to tide me over for a couple of months while I looked for something else.

@GinDaddyRedux

What do you actually really want to know *@UnaCorda* ? Or is this gawp at the poor day?

No, not at all. It's totally understandable that if you're poor you don't have leftover money to save. If anything it's "gawp at the moderately well-off who are spendthrifts and don't save even on a salary of £80K+".

Because some of us live in poverty, some of us live on the breadline. It’s really not that hard to work out.

Currently, if you have you mortgage, it makes better financial sense to pay this off early rather than lots in savings.

then life frugally when I'm older

Sounds shit.

Op we have savings, just incase but I think a lot of is that people just spend there money. It goes easily.. meals and drinks out, entertainment, clothing.
Some people prefer to live for the now instead of the future.

My DD and her friendship group live beyond their means. We live in the NW and with her partner, they are on at least £70k a year. Their house was bought for £115k and they own a rental property. Yet they constantly lend money off people who have less income.

Sometimes your friendship group massively influences your spending habits.

It's an instant gratification thing.

I've never been able to save because of a lack of income. I only have around £250 at a time.

I think what keeps my DD in this mindframe is that everything is available on credit. She's just got a boiler on a repayment scheme. It's only labour that you need cash for.

@jimmyjammy001

Everyone's situation is different, but if you earn above the national average you should really have a rainy day fund, if not then you have over stretched your finances somewhere even if being recently furloughed on 80%, generally you should have around 6 months living expenses ready for the unexpected, if low wage then that will most likely be impossible due to cost of living.

I agree with this, although I expect very few people manage six months' worth.

We have savings but they fluctuate, the most we had was about 20k but our car got written off the same year I went back to uni so we only had one income. They went down to just a few hundred £ then.
Slowly building them back up now. I'd like to go back to work in January but who knows (eg with coronavirus and school closures etc)

@GinDrinker00

Because some of us live in poverty, some of us live on the breadline. It’s really not that hard to work out.

No, it's not hard to work out at all - which is why I said, "I understand that some people are on a low/minimum wage or perhaps have unexpected outgoings, but there must be a lot of people to whom this doesn't apply."

@BluebellForest836 it might sound shit to you but I don't have much choice due to my income.

@Waxonwaxoff0 - train for a better job. It’s not impossible. I don’t know why anyone would go along in life thinking ‘yes, im going to aim to live on the bread line when I’m at retirement’

if you earn above the national average you should really have a rainy day fund

You might have trouble getting a rainy day fund on an average salary in the SE. The average is £30k (or very close to to that), so net pay is £2k max, considerably less if you have student loans or pay into a pension.

A one-bed flat where I live will cost £850 a month, council tax approx £170. If you need 2 bedrooms, you're looking at £1,100 and c/tax will be more. And this isn't London - if you want a London salary, the fares will be £500 a month.

In this county (East Sussex), the gap between average earnings and housing costs was the highest in the country a few years ago and I doubt if it's changed much. My district has the 4th highest council tax in the country, too.

We take home £43,000. That's after tax. Three people in a three bed house. £880 for mortgage plus other bills. We save £500 a month. Usually. Got £4K saved at the moment as we had to get a new car in feb. We dip into it though. Could save more but we don't.

You've pretty much described us LakieLady We live in Brighton, our rent is exactly £1100pcm and DH usually commutes into London. :)

@BluebellForest836 wow, yes, why didn't I think of that. Just "train for a better job" as if it's that simple.