This post was written in collaboration with the Bank of Scotland
Last week, we talked about how little amounts add up when you start saving, and how if you put these little amounts towards your mortgage every month, you can save thousands in interest, and shave years off your mortgage.
Today, as we are entering the last week of the month, let’s have a look at the savings goals we could set for May.
First of all, if you haven’t built the habit of saving, know that you should start slow and easy. Imagine going on a diet and starving yourself from day one. Your body will feel miserable, and after three days, you’ll be back to your unhealthy eating habits. The same goes with saving. You can’t realistically say “hey, I’m going to save £2,000 next month!” if you are used to saving £0.
So how do you start? By saving £1, or £5. No amount is too small. We are building a solid, long-lasting habit. There are a few fun challenges that can help you out:
The £1 a week challenge. Start week 1 by saving £1. Easy, right? OK, now save £2 on week 2. And so on, until you reach £52 a year from now. You will have saved a grand total of £1,378!
The 1% challenge. Start saving 1% of your income. If you make £1,500, that is only £15. Save it on payday and put it towards your mortgage or on a savings account you won’t touch. Next month, save 2%. Keep going until you feel the pinch.
The cash jar challenge. Every day, throw all your cash in a jar. When the jar is full, take it to the bank.
The fiver challenge. Same principle, every time you find a £5 bill in your wallet. Save them all then take them to the bank.
The no spend day challenge. Say every day you spend £2 on coffee, £8 on lunch, and £5 on drinks after work. Ditch the coffee and the pints once a week, pack your lunch and put £15 towards savings.
None of these challenges are too drastic, and they will help you start saving.
How about finding ways to get more breathing room in your budget this month? Again, you can turn it into a small challenge. A month without… beer, haircuts, bus pass, buying clothes, etc. Whatever you feel wont be too hard to start with. Every time you would have spent on that item, save the money and pay off your mortgage. At the end of the month, figure out the total amount saved, and input it in a mortgage calculator, to see how much more you have saved in interest.
As a general rule of thumb, every £1 you save can save you £1.5 to £2 in interest over the life of your mortgage. That is a pretty solid return! If you have a £140,000 mortgage at 4% over the next 25 years, saving £200 this month and doing that one overpayment will save you £340 in interest. Overpaying £100 every month would save you £16,838 in interest, and allow you to become mortgage free 4 years and 7 months later!
Check out the Mortgage Free Faster hub from Bank of Scotland for more information.
Which saving challenge are you ready to tackle next month?