How is a person expected to save money when he or she barely makes it from paycheque to paycheque? How do you start to “pay yourself first” when you hardly have enough (or don’t have enough) to pay your expenses as it is?

The first thing to ask yourself is why you want to save money. Is it for retirement? Is it for a holiday or a new car? Is it for university or for that baby you and your spouse have been wanting? The reason for doing this is twofold:

1. Having a “face” on your savings goal inspires you to do what it takes to achieve it. Wanting to save £500 a month isn’t that inspiring when compared to a concrete goal. Instead, saving £500 per month for 6 months in order to take a vacation in Spain is a much more motivating savings goal, and;
2. Knowing what you want will give a good idea of how much you need to save to achieve it.

Once you know how much you’d like to save and over how long a period of time, take a hard and realistic look at your budget – your income and your expenses. Identify whether or not you are living within your means. If not, start there. Your income needs to be larger than your expenses. The easiest way achieve this is to cut down on expenses, as it can be considerably harder (though not at all impossible) to increase your income.

If you can identify a single line item in your expense column that you can cut down or do without, you’ve just found the source for that figure in regular savings. Keep that figure in your budget, but change the heading from the original expense (drinks at the pub, dinner out, dry cleaning, dog walking) and replace it with Savings.

Now that you’ve done that once, where else in your budget can you do the same thing? How many headings can you change to Savings? Lump them all together and how much money have you just made available for monthly (or weekly) savings?

Evaluate your budget regularly to make whatever adjustments to it that may be needed in order to better help you meet your savings goal.

Now, search for a deposit account for your money. Compare all the offers out there before jumping into the most obvious or convenient. Not all deposit accounts are built alike; some are less beneficial than others, and some aren’t beneficial at all. (See our companion article on How to Compare Deposit Accounts for assistance).

And remember, this is your money. The terms and conditions for the account you’re considering may be long and boring, full of fine print and big words and awkward “legalese” language. But the details they contain could drastically impact your savings plan if you agree to them without first reading and knowing them.

Take the time to familiarize yourself with all the terms and conditions of any account you sign up for, before you sign up for it. That will give you the peace of mind at night of knowing you’ve made not only a smart decision in saving your money, but you’ve also made a smart decision as to where to keep it.