The National - Here's how to boost your savings in 2022

Vijay Valecha, Special to The National January 13, 2022

The economic uncertainty caused by the Covid-19 pandemic has affected millions of people worldwide. While some have been able to save more money thanks to stimulus cheques and a lack of spending

options because of movement restrictions, others faced salary reductions and layoffs.

But with the Omicron variant spreading rapidly and triggering more restrictions in cities around the world, financial experts are highlighting the importance of saving and creating an emergency fund to protect against unexpected expenses in 2022.

“Saving money seems like a very simple task, however, it’s not for everyone. As people have varying incomes, expenses and responsibilities, it becomes increasingly difficult for many to save money,” says Aman Moti, a wealth adviser at financial services company Holborn Assets.

“The positive thing is that it doesn’t mean it’s impossible to save. With a little change in our mindset and spending patterns, it is safe to say you can reach your financial goals in 2022.”

Twenty-nine per cent of UAE consumers started paying more attention to reducing discretionary spending and creating an emergency fund owing to a fear of deteriorating health or existing medical conditions, according to a December survey by online financial aggregator Policybazaar.ae, which polled 3,000 people.

The pandemic forced 28 per cent of UAE residents to prioritise their needs over wants, while 31 per cent shopped only when there were offers and discounts available, the Policybazaar.ae survey found. Consumers spent only on essential products such as groceries, rent, utilities, transportation, health care and wellness products because the pandemic was a wake-up call for them to save and invest money for contingencies, it added.

We spoke to financial advisers to compile top tips on how to save money this year.

Set a monthly budget

When you stick to a budget, it’s easier to track what you’re spending on various expenses, says Sophia Bhatti, a partner at financial advisory Hoxton Capital Management.

It’s also easier to see if you’re going overboard in a particular category. If you set up a budget for 2022, you may find that you have an easier time meeting savings goals, she adds.

Once you have a set budget in place, you will have an overview for the whole month and this will stop you from overspending, Mr Moti says.

“Prioritise necessities like food, water and bills and then allocate a certain amount a month towards your wants,” he says.

Try budgeting methods such as the 50:30:20 rule, which can help you to manage your money simply, effectively and sustainably, says Peter Kimpton, the chief operating officer and personal finance expert at UK-based website Family Money.

The rule suggests dividing your monthly income into three spending categories: 50 per cent for needs, 30 per cent for wants and 20 per cent for your financial goals.

The 50 per cent towards “needs” includes regular essential outgoings such as rent, mortgage and bills, 30 per cent should be set aside for “wants” such as hobbies, shopping or subscriptions and 20 per cent can be used for financial goals such as paying off debt, investing or contributing to savings, Mr Kimpton adds.

Cut down your biggest expenses

Instead of trying to cut back on your small expenses, focus on the larger ones to make a significant impact to your budget, according to Vijay Valecha, the chief investment officer at Century Financial.

“For most people, housing costs tend to be the biggest part of their expenses. If you’re renting, consider downsizing to a smaller home or living with roommates,” he says.

It is also important to be aware of how much you end up spending every month, says Mr Moti. This will allow you to cut down on unnecessary expenses, while also allowing you to put a savings target in place for the year ahead, he adds.

“Type your expenses on your phone notes at the end of each day. Alternatively, you can type in on your phone immediately after buying something. Make sure you record each and every expense as this will give you an idea of your annual spending and help you understand the amount of money you can save,” Mr Moti says.

Automate your savings

If you have a fixed income, consider automating your savings contributions each month, Mr Valecha says.

“This means setting up an automated transfer from your daily spending account to your savings account each month. By automating your savings, you further reduce your chance of using these funds to cover your daily expenses,” he says.

Most people save what is left towards the end of the month, however, to optimise your savings, you need to pay yourself first, Mr Aman says.

“Put money aside first and then spend the rest. Doing this will help you be more determined to save money,” he adds.

Shop with a grocery list

Reduce your weekly spending at the supermarket by meal planning for the week to cut unnecessary costs and to efficiently plan what you need to purchase each week, Mr Kimpton says.

“Food shopping is one of the biggest weekly expenses for families. From setting a budget each week to planning the meals and food you will need, there’s a range of things you can do to cut your spending,” he says.

Sticking to a grocery list will help you to avoid impulse shopping and spending more than planned, according to Mr Valecha.

Another tip is to avoid overpriced items in the checkout lane – that can be where stores really kill your grocery budgeting plans, he adds.

Pay off credit card debt

Having a credit card balance means spending money on interest. Paying that balance off means not just shedding debt but also not having interest accumulate against you, Ms Bhatti says.

“If you’re not throwing money away on interest, you can use it to increase your savings instead,” she says.

Set a limit on how much you can spend on your credit or debit cards, Mr Valecha says. This stops you from overspending and encourages you to reassess your daily expenditures in advance, he adds.

“One of the many essential tips to bear in mind is to avoid bad debts at all cost. If something isn’t necessary or worth buying, then save your credit card from the additional bills. You should also avoid bank loans if you’re not planning to use it to generate profits,” Mr Moti says.

Set up an emergency fund

Everybody needs to have an emergency fund for rainy days, Mr Valecha says.

“This is especially important because when these expenses come up, there’s a much bigger risk that other expenses will go unpaid. A portion from every paycheque should be set aside into a separate savings account,” he says.

About 51 per cent of Americans have less than three months’ worth of emergency savings, according to a July survey from personal finance website Bankrate. Twenty-five per cent of survey respondents cited having no emergency savings at all in 2021, up from 21 per cent who said they didn’t have any in 2020, the survey found.

Start a side hustle

Instead of putting all your efforts towards expanding your savings, try boosting your income with a side hustle, Ms Bhatti says.

“There’s a number of things you can choose from depending on your skills, schedule and savings goals. Think about the amount of money you want to earn and the number of free hours you have each week and let that help you narrow down your choices,” she adds.

Cancel unused subscriptions

It is worth checking your current subscription plans. Whether it’s fitness apps, TV or magazine subscriptions, it’s easy to sign up to different services and then forget about them but still be paying a set price each month, Mr Kimpton says.

“It is the perfect time to start fresh with your subscriptions in 2022 and to cancel any unnecessary payments,” he says.

“To do this, take a look at your transactions and make a list of all the subscription services you’re paying for. Are there any you don’t use? Start by cutting those. Even with the subscriptions you do use, question if you could try cutting those temporarily to see whether or not you miss them.”

Look for discount codes

If you shop online, always make sure to spend an extra five minutes searching for a discount code, Mr Kimpton says.

“Sometimes you may have to do something like sign up for a newsletter to receive a discount off your next order. Other times, there may be a promo code you can find that will offer you a better deal.

This can help you save money each time when shopping online by finding the latest discounts.”

Refinance your mortgage

The less money you spend on your mortgage, the more you are able to save, according to Ms Bhatti.

“Refinancing could be your ticket to a lower mortgage payment every month,” she says.

An overwhelming majority of US home owners said they wouldn’t refinance their mortgage to save $100 a month, despite it being enough to provide tens of thousands of dollars in savings over time, according to a September survey by personal finance website MoneyWise.

When asked how much they would need to save each month for a mortgage refinancing to be worthwhile, 29 per cent of homeowners said $250, while 29 per cent said it would take $500, the survey said.

Stock market investing

It is crucial to learn about investing your money to maximise returns, according to Mr Valecha.

“It is essential to understand the various schemes available for investment, such as mutual funds, provident funds and equities, among others, and invest in one of them to gain benefits. Investors can see their investment grow with the effect of compounding,” he says.