starting new job savings advice

S

saverman

Guest
I am 25 and after going back to college have finally found a job and started last week.

I have no savings and will start paying off a 5 year loan with 340 euro a month

so here's my situation

earn 2500 net a month

Costs per month
Loan-340
rent-280
Bills-30

I don't have any other bills but hope to buy a car but also save as much as I can,any advice?What would be reasonable?
 
First thing I would do would be set up a monthly Standing Order to a Credit Union account. Generally CU accounts work best for savers as the money they deposit is not easily accessible (i.e. ATM machines on nights out!!).

After that, decide how much you want to save each month, and how much you want to live off. Luckily, other than your loan you have little else outgoing (for now - wait until theres insurance and tax to be paid on that car!).

Once your outgoings are taken away, you are left with €1850 per month.

As a standard amount (given that you have little outgoings) I would recommend putting away at least 650 euros per month - leaving you 1200 euros to play/live with.

If you are looking to buy a car I would also recommend buying a cheap and cheerful one for now until you have some savings behind you - theres nothing worst than another loan on your back.

HOWEVER - if you wish to save for a few months before purchasing a car, I would explore the possibility of saving above the 650 euros per month. Perhaps around €850?? It all depends on what you want to buy, etc.

Putting away €850 per month would leave you with €10,200 in savings after one year. Not bad!!!
 
saverman said:
I don't have any other bills but hope to buy a car but also save as much as I can,any advice?What would be reasonable?
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The first piece of advice would be to avoid having savings (other than an 'emergency fund' for unforeseen expenses if you feel this is required/valuable to you) while you have other outstanding debts (which will be costing higher than your return on the savings).

Depending on the type of loan, you'd earn more by accelerating the repayment of this and clearing it in a shorter term than the initial '5 years' (obviously this is a moot point if your loan won't allow for accelerated repayment, but it's the first area I'd investigate).

Your monthly expenses as listed are €650. The list looks a little 'short', so I'd suggest trying to add in all foreseeable costs (groceries, travel, entertainment, etc. etc.). By making the list as comprehensive as possible, you'll have a far clearer monthly budget to work with. The simple act of 'making a budget' can in itself help reduce your monthly outgoings. This can be taken a step further (and allow you to produce a far more accurate budget) if you use a 'spending diary' to account for all outgoings. It can be surprising how much money is burned up on the little things like a daily coffee or treat.

Once you have a clear estimated budget, you can easily set up a standing order to transfer your estimated saving per month to a separate savings account so it makes the urge to spend it less of a factor. Depending on your specific situation (commuting costs per month, food costs, etc.) you look like you'll be in a position to save a sizeable chunk each month (at a glance and making assumptions on what your 'other' costs might be, it looks like ~€1000 per month).
 
Well the loan is at a fixed rate so I cant pay off more even if I wanted to but maybe I could ask the bank about it, they may charge me more though
I listed the essential debts, I have no travel expenses because I rarely go home to my parents house, I work only 10 mins walk away,and I walk cycle everywhere else, regarding entertainment l like a few beers with my friends at the weekend, maybe a trip to the cinema and 1 chinese a week, im not sure whats a reasonable amount to allow for entertainment a month
 
If the loan is fixed, throwing minor amounts at it occasionally wont do much good - a good lump sum generally is better. I would build up the savings.

One thing though - I would recommend clearing the loan as quickly as possible and THEN concentrating on a car.
 
saverman said:
Well the loan is at a fixed rate so I cant pay off more even if I wanted to but maybe I could ask the bank about it, they may charge me more though
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Certainly worth looking at and crunching a few numbers on. If you can save by accelerating the payments (including any additional fees levied), it'd be worth it in the long run.

Do consider what level of 'emergency fund' you might need/want to have available. If you've no dependants etc. you might be happy with none, but it's hard to put a value on peace of mind so figure out what is right for you.


saverman said:
regarding entertainment l like a few beers with my friends at the weekend, maybe a trip to the cinema and 1 chinese a week, im not sure whats a reasonable amount to allow for entertainment a month
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You've two options there, depending on how you want to look at it.

Figure out how much you wish to save, then match your social life to match the budget (higher savings) or else figure out what you're happy to allow yourself to spend (you're only young once and from a financial point of view you're not 'in trouble') and save the rest.

It's hard for anyone else to do figures on those. For a 'few beers at the weekend' you could be talking about +€90 (club, taxi, beers, chipper, etc.) or closer to €30. Cinema probably the guts of €20 including snacks, Chinese in the region of €15... so probably looking at ~€300 - €400 on entertainment as a realistic budget? (you could obviously cut this down greatly if saving is a priority or spend far more if you wished to)

So €650 for the 'fixed' costs. €400 on the entertainment. Leaves €1450 for food, incidentals and savings. Again, your bills will depend on how thrifty you are/wish to be. A weekly spend could vary hugely depending on your personal choices on where to shop, what to buy, etc etc. Going for a target of €850 savings as suggested by dmos earlier would seem a decent level and can be increased/decreased as you see fit over time.
 

Well where did I say I was only throwing Minor amounts at it and only doing it occasionally?

I stated I was paying 340 monthly which you cant really call a minor amount or occasionally

Also if you understand anything about fixed loan repayments you will know you cant pay more then the amount agreed by you and the bank
 
I forgot to add that i have started orthodontist treatment which is going to cost me 5k, the payment plan that the ortho does is 4 installments over 2 years with the intial payment of 1250 due once treatments starts, I have paid off 500 of this first payment
 
Saverman, I have a fixed term loan that I am paying off 8 months early this month - believe me I have done my research and saving to be in a position to do this. Had I been hoping to put an extra 200 per month off the loan, I would have been wasting my time. Instead I saved and worked my bootie off and now I have the entire amount to clear the loan aside plus a little extra for the inevitable fee to pay off the loan early.

Fixed or not, it is possible to clear it early but you need to save for some time to do it. Talk to your bank.
 
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