How to be comfortable not saving a lot of money?

[repta]

I am aware that I am fortunate and there are many far worse off. But I could do with a bit of money advice as it's not really something my family discusses.

For context, I am recently turned 24 and a year into a graduate job. My take home is about £3k a month after additional pension contributions. My masters degree used up all of my savings so I was left with roughly £1,000 to my name in savings which was scary for me.

My rent is £1000 a month, food, bills, tube, gym, probably another £600 a month (London). The rest of the money is spent on eating out, drinks, having fun, theatre, holidays, visiting family and friends. I spend a lot on holidays.

I only 'manage' to save £300 a month into a fund I can't touch. I then save maybe £100 a month into a savings account.

How can I be more comfortable with not saving a huge amount. I appreciate you are only young once and I should let my hair down a bit but I get anxiety because of property prices etc. After my grad scheme finishes when I'm 25, my take home will probably be about £6k a month, which I figure I can then save more money then.

Take comfort in the knowledge that plenty of people older than you aren't able to save anything at all and appreciate your privilege would be my advice. Not sarcasm either, I really mean it

Do you save any money into a pension fund?

Yes, the OP says this.

I can only save £300 and I'm on min wage so to me that's a lot and I feel very privileged.

You are a year in and seem to be living your life to the full but are making plans for the future (pension and at least some savings).
Enjoy a year or two but when your earnings increase, I would knuckle down and think about trying to build a decent fund to pay for house deposit etc. Time will fly by and there is always a reason to put off savings "until next year", don't let this happen to you because all of a sudden you may want that deposit.

300 a month sounds plenty to me in savings at your stage of life if you're paying additional voluntary contributions, all your bills are covered AND you have plenty of disposable income for a great sounding social life and holidays.

As for your salary when you've finished your grad scheme.....I really don't think you need to worry. The important thing is that you have the CHOICE to save much more than you currently are - if and when you need to. Enjoy that feeling before you've got responsibilities and spend the spare cash now on fun things while you have the opportunities to do them.

I can only assume that you come from a wealthy family, to have such worries in your financial position.

I actually think the advice to enjoy yourself to the young is misguided. I was pretty careful from the moment I started work, and at 40 am pleased I did. I still did some fun stuff, but not as much as what was in offer. The people I know who ‘made the most of their twenties and early thirties’ are regretting it now. That money can only be yours once!

I get what you mean, but it also sounds like OP has worked very hard at establishing a good career with great salary prospects. Sometimes that comes with privilege and sometimes it's down to aspiration, sheer hard work and determination and putting up with extremely long and stressful working hours.

Your net worth is ticking up, so you're doing something right.

Work out your long term plan for investing/property ownership etc, and what you need to do to meet that.

But in the meantime, all I can say is I bitterly regret not traveling more before children and responsibilities, so well done you for doing that.

You are living a life in terms of your age and salary that 90% of the population dreams of doing.

Maybe start hanging out with less wealthy friends and you'll feel better about yourself

OP said she spends a lot on holidays. All it would take to save some additional money each month is to go on fewer trips each year or look for types of holidays which give better value. The problem is lifestyle creep. You don't have to completely deny yourself pleasures like holidays if you have the income level that OP has at her age. But you could certainly spend less perhaps, so that you are doing the "travelling" and experiencing the world without the "luxury holiday" thing.

Thanks to inheritance, I am in the position where I could have the choice to retire early if I want. I know someone else in a similar position but they'd rather go on regular luxury holidays now and work longer. Whereas I choose to have very enjoyable holidays but because they aren't in long haul 5 star beach front hotels with personal butler/private beach club/fine dining etc. I'll have more money to retire early.

It's horses for courses.

Yes. It's still a privileged position regardless of how it's achieved. I was very clear that it wasn't a dig... Actually being grateful for your privilege is a wonderful tool to appreciate what you have and worry less

Are those long terms savings or do you then use them for holidays?

I think spending £1000 a month on fun is nuts - I was 25 when I moved to London 5 years ago and survived on £600 after living costs and had a great time, plus saved!

You sound like you are absolutely fine. Just think your salary will soon double. You can still spend a grand a month on fun and save over 3 grand! Fabulous position to be in, you really don't need to worry

£600 five years ago is over £800 now. Still not quite £1,000, but not outlandishly different.

@mrsdineen2 but I was also saving from that £600! Also is it worth £800 now?

Regardless I just saw the OPs point about being on £120k next year so my point is moot 😂 I'm guessing they're in investment banking by so keeping up with that mad lifestyle

I think saving £400 a month is great. Maybe think about getting a first time buyers ISA. You can put in up to £3k a year and the government tops it up by 25% I think. And they are tax free. It can only be used by first time buyers otherwise I would have had one. For young people now I think house deposits are the most difficult thing and I would be aiming to have 10%of the cost of the property as a minimum. More is better. So I would be working towards that.

If you are bold enough Generation Z learns crypto and builds up a successful e wallet for medium to long term security. Apparently it is your generation that invests in it the most.

You're only 24. If you're contributing to a pension, that's the main thing. At your age I was like you - not London though - and the only thing I saved for was holidays. No regrets, aside from the bonuses I got. I squandered them. In hindsight I should have saved at least some of them as I've not seen bonuses like that since (pre 2008).

Thank you for all the advice! Appreciate it.

I know I could save money by cutting eating out/pints at the pub with friends. But London really is so expensive.

On the point about being from a privileged background - I really am not. Was brought up in a very working class area of the north east.

OP I think you’re fine waiting until your earnings increase before saving more.

But if I were you I’d make sure that you resolve to increase both savings and pension contributions as soon as you get that pay rise - you won’t then miss that extra cash and can start building a nest egg. Pension in particular you will really reap rewards if you invest now.

I think what I would think about is what is adding value to your life? Is it all your spending?

So e.g. I do enjoy going out with friends, but I also enjoy e.g. having friends over for some food and wine at home. I love going away on holiday, but I have got pretty good at booking cheap trips - I will manage 4 weeks a way for about £2500 this year.

So have a think about how much you spend on each individual bit of your spending and decide if that bit is what you want to spend your money on (rather than just what you've ended up spending your money on).

I think there are often places that are less expensive when you get to know somewhere but it depends on the place.

If (for example) you are spending £3600 a year on holidays, then you're spending another £700 a month or £175 ish a week on going out. Maybe that is what you want - and given how much your income is going to increase you can certainly afford it if you want. But is it what you want?

I think your 20s should be about enjoying yourself and making the most of your youth.

When I was on a graduate scheme (over 10 years ago now!), my take home pay was less than £2k a month and I spent all of it and then some (interest-free graduate overdraft, 0% credit cards). Then I qualified, changed jobs and got a substantial pay rise, so I cleared all of my debt (thankfully before any of it became interest-bearing!) and started saving. I was able to save a deposit and bought a flat by myself in London at the age of 31, eight years after starting my first job.

I have zero regrets for being care-free and spendy in my early to mid 20s, I had the absolute best time and made some amazing memories on the numerous nights out and holidays. I could have been careful and saved obsessively to get on the property ladder a couple of years earlier than I did, but for me it’s not worth it.

If you’re confident in your earning potential and your abilities, OP, I would be prioritising having fun now. After all, you’re in your 20s and living in one of the best cities in the world. 🙂