Have a savings goal
Do you have a savings goal? Maybe you want to save for a new home, a dream wedding, or maybe Hajj. Whatever it is that you’re savings towards, you may be tempted to think that you’d like to save as much as you can and make decisions based on that, but actually, having a specific financial goal will really help you focus on saving. And you will be able to enjoy a real sense of achievement as you progress towards your goal.
A key factor when calculating your goal is understanding what is possible. Be realistic about much you can afford to put away each month.
Once you know the size of your savings goal, you can get started. Be aware that the process is likely to require sacrifice because it will be a significant amount. But cutting back now will speed up the time it takes you to pick up those keys.
Don’t keep a car. A report by Kwik-fit calculated that the average British motorist spends £162 every month just running their car. This sum doesn’t include the cost of buying the actual vehicle – so if you have car finance you’d need to add that expense too – just the necessary expenses of having a car, such as fuel, insurance, road tax and servicing. So even if you’re pinching your pennies, it is still costing you thousands of pounds a year. Could you live without one?
Of course, the need for a car will depend on your lifestyle and it may be an expense that’s worth having. For example, if you have returned to your workplace and feel safer driving rather than taking public transport. But could you, even in the short term, cut down on some of those costs? Downsize your car? Share a car with someone in your household or support bubble? You’d not only be saving money but also doing your part to help the environment.
Use your holiday money. Unless you were very lucky, chances are your holiday plans for 2020 have been impacted by the COVID-19 disruption, so why not save that money towards your deposit? According to travel firm Expedia, families spend an average of £4,800 on family holidays each year. Even if the amount you spend is not normally as high as this, it will still be a very welcome addition to your deposit savings account.
Budget wisely. How much is it costing you to maintain your current standard of living? Do you know? By understanding exactly what you earn and the cost of all your regular outgoings, you can find areas to cut back – and you might find it quite satisfying to lower your payments on expenses such as gas and electricity, mobile phone and various insurances, for example.
If you’re not sure where to begin, you might want to start with the free online budget planner from the Money Advice Service. It takes you through your budget step by step and you just need to gather as much information as you can about your income and spending to get started (you will need things like bills, bank statements etc).
Save smart. Depending on when you plan to have achieved your savings goal, you might want to consider investing your money in an account with a high expected profit rate. Typically, Fixed Term Deposit savings accounts pay the highest expected profit rate because you agree to lock your money away for an agreed period of time at the outset, and if you decide to save with Al Rayan Bank you will need a min deposit of £5,000. To find out more about our Sharia compliant Fixed Term Deposit range simply click here.
ISAs are another good option. Although the expected profit rates of return may not be as high as a Fixed Term Deposit, your profit will remain tax free, subject to limits and, depending on the ISA you choose, your money may be more accessible. To find out more about our range of sharia compliant ISAs click here.