How I Save: The 25-year-old software engineer with £83,000 saved

How I Save: Tom
Sam earns £70,000 a year and has £83,000 saved (Picture: Getty/Metro.co.uk)

In our weekly series How I Save, we have a nose around people’s finances, looking at how they save, spend, and generally manage their money.

Why? Because we’re all awkward when it comes to chatting about money and could do with a more open conversation.

After all, how are we supposed to improve our handling of money if we don’t feel comfortable asking for help or even admitting we’re struggling?

How I Save aims to take an honest look at how people handle their money, then gets some expert advice so they (and we) can learn how to save better.

This week we’re chatting with Sam*, a 25-year-old software engineer living in Hertfordshire.

How Sam saves:

I am lucky enough to earn £70,000 a year total, an amount that I feel very surprised and lucky to have achieved.

In my savings account right now I have £83,000 (made up of cash and conventional investments), £26,000 saved in a pension and a further £4,000 locked in crowdfundinf investments that I cannot withdraw and may or may not disappear overnight.

I’ve saved this much money by:

  • Keeping track of spending using fintech budgeting apps such as MoneyDashboard (probably my favourite) and Emma (an impressive newcomer).
  • Checking HotUKDeals to ensure I’m always getting the best deals on the stuff I buy.
  • I have a cashback credit card to earn money back on all my purchases throughout the year.
  • I use cashback sites TopCashback and Quidco (I have earned over £2,000 alone this way).
  • I take advantage of a Stocks and Shares lifetime ISA paying a government bonus of £1,000 per year.
  • Much of my savings are invested and my investments have performed very well so far.
  • Using regular savings accounts with high interest rates.
  • Paying off credit cards in full each month to avoid interest charges.
  • I limit the amount I spend on ‘going out’ and settle for cheap occasional holidays with family.
  • I have low household bills due to living with family.
  • I am able to drive to work, so avoid extortionate season ticket prices. My annual petrol cost is shared and is around £360.
  • My partner has a good job and often treats me to takeaways and gifts and splits some of the bills.

My partner and I are saving for a deposit on a property. The struggle to afford a house – and the enormous deposit needed, is an absolute indictment of the current state of affairs for our generation. The current government could not care less about housing affordability for first-time buyers. The token measures that are in place serve to drive prices even higher. It’s no wonder people are giving up and resigning to renting in perpetuity.

I would say that the underlying motivation that drives me to save so much is security.

We live in desperately uncertain times and people of my generation face a perfect storm of high tuition fees, precarious employment with enormous graduate competition, Brexit and house prices that are now so high many will be renting for the rest of their lives.

One day, the great fortune I have had so far may run out and I want to be prepared for that.

I consider 100% of the money that comes into my bank account as ‘my savings’ and anything I spend comes out of that. I find that this helps me to stay focused on my saving goals. It is worth mentioning that the vast majority of the money I have saved was on a substantially lower income – I started saving properly from the age of 19 when I was earning less than £14,000.

Overall, I live quite frugally. I do go out for dinner quite often, but it is almost always using a good deal I’ve found on BuyAGift or RedLetterDays. I don’t buy clothes very often, and when I do it’s always in a sale.

An illustration of a man holding a large bag with a pound sign on it, on an orange background
(Picture: Ella Byworth for Metro.co.uk)

I have cheap holidays with the family and go abroad at least once a year. I feel like I do treat myself enough, too much even. After my bills general outgoings, I usually manage to save around £3,000 per month. This means that I should hit the magic £100,000 milestone by the middle of 2020.

I don’t have many friends in my area and therefore I don’t go out to socialize on a regular basis. I usually meet up with friends in London once a month and friends from elsewhere in the country a few times a year.

My savings kryptonite is HotUKDeals. I am an absolute sucker for a good deal even if it’s something that I might not 100% need. Occasionally I will ‘splurge’ a great deal of money, more than £500 on something that is a complete luxury like the latest new smartphone, a fancy bike or a gaming laptop.

Every year Black Friday is like a bomb going off in my bank account and then there’s Christmas to deal with. I am really worried that earning more money is going to lead to ‘lifestyle inflation’, whereby I become accustomed to a higher level of spending. This is something that I desperately want to avoid.

How Sam spends:

Monthly expenses:

  • Rent £200
  • Mobile Contract £12
  • Health Insurance £66.67
  • Car Insurance (shared) £31.69
  • Petrol (shared) £30
  • Gym: £25
  • Shaving subscription: £20
  • Amazon Prime £6.58
  • Netflix (shared) £4.99

A week of spending: 

Monday: I was on holiday so I made myself a cup of soup for lunch at home. I later went out to see a show in London (I paid for this last year so it doesn’t count), but I still had to buy the train ticket which was £12.55 – god bless the 16-25 railcard.

When I got back to the station later in the evening, I got an Uber home which was a reasonable £5.01 but I probably should’ve walked it. Dinner made by parents – £0.

Total for Monday:  £17.56

Tuesday: I bought myself a soft drink in the morning to help me focus, this was £1.26.

For lunch, I bought myself some soup and salad from the canteen, this was £3.40. Dinner was a chicken curry made by my parents which cost me £0… perks.

Total for Tuesday: £4.66

Wednesday: A meal deal from the local supermarket for £3 – a British staple. It consisted of a bean wrap, two hard-boiled eggs and a soft drink. Necessary fuel before hitting the gym.

Dinner provided by parents again.

Total for Wednesday: £3

Thursday: Another classic meal deal from the local supermarket consisting of a ham and cheese roll, two hard-boiled eggs (gotta get that protein) and a soft drink for £3.

Parents made a fish pie. Partner kindly bought me a large tub of salted caramel ice-cream which I devoured in less than 15 minutes (not sorry).

Total for Thursday: £3

Friday: Today I managed to go to the gym again (yay) and I grabbed a meal deal afterward, consisting of a tuna roll, a protein shake, two eggs and a cheese twist this all came to £3.85.

In the evening I attended another pre-booked west end show (Come From Away) that I booked as part of the New Year sale in December for £30.

On my way out I grabbed a bottle of Peroni from the fridge.

The train ticket was £12.55.

The show was a 10/10, highly, highly recommended. On the way out they were collecting for the Australian fires – £5. I grabbed a Maccies on the way home and used a deal to get free fries! – £3.38.

Total for Friday: £24.78

Saturday: Partner buys me lunch from the Co-Op. Went to see another pre-paid show (Touching the Void. I paid £20 for the two tickets in December) with my partner in London. The train ticket was £9.90. The play was a solid 7/10.

Partner orders Uber home and parents have left chicken & mushroom risotto for dinner.

Total for Saturday: £9.90

Sunday: Made a ready-meal Indian curry from the fridge for lunch. Attended another West End show (Act Of God). This one was not pre-booked but I was able to get it through a seat-filling website for only £5!

On the way to the station I bought a soft drink from the local Co-Op – £1. Again, I paid £9.90 to get a travel card.

The show was pretty good – 7/10. Afterwards, I figured I’d stay in London for a little while and see another show (No Sleep Podcast live) for £24. I wanted to go to a bar beforehand, but since a pint in London is at least £5 I buy three Rekorderlig from a supermarket for £4.50 so I can get a head start before I get to the bar and buy three expensive pints.

After drinking all three ciders, I realise I have misjudged. And go to the bar, yet do not order anything. I get to the theatre and buy a pint of Camden Hell’s… £6. I swear, London beer prices are against my human rights.

The show was an impressive 8/10, highly recommended. Was able to meet the creator of the No Sleep Podcast David Cummings and his amazing cast after the show.

I walked home, avoiding the Uber cost (yay me).

My parents made a roast dinner.

Total for Sunday: £50.40

Total spent this week: £113.30

How Sam could save:

We spoke to the experts over at Plum, an AI assistant that aims to boost your bank balance, to find out how Sam can save better (and what we can learn from his spending).

Note: the advice featured is specific to one individual and doesn’t constitute financial advice, especially for a London budget. 

Here’s what Plum said:

Hey there Sam, thank you for sharing your week in money with us.

What a great position to be in at 25! As you acknowledge, you have a good start with your salary and minimal rent, but it still takes a lot of hard work to save this much. Bravo!

Savings:

By our maths, you are saving approximately three-quarters of your take-home pay each month: an amazing feat by anyone’s standards. At Plum, our users can choose different saving moods, and we’d have to say you would definitely be on Beast Mode.

With inflation currently higher than the rate of interest offered by many savings accounts, it’s good to see that you’ve been diversifying by using a variety of different investment options.

Technology has brought a ton of different ways to invest into the market so it’s a good option even for those who aren’t in a position to save quite as much as you each month. Bear in mind that your capital is at risk with any type of investing.

It’s also great that you’re counting your pension as part of your savings. In the UK, we’ve collectively saved £90.4 billion towards our pensions in 2018, thanks to auto-enrolment, which we think has ushered in a new age of pension awareness and future-planning among young people. As your employer will match your contributions, you can expect this amount to grow substantially over time, which should assuage any worries you have about being financially independent in old age.

As for the crowd-funding… we have all our fingers crossed for you!

Budget:

A saving target of £3,000 a month is ambitious, even on your salary, so let’s break down a little how you’re managing to do it.

There’s no denying that living with your parents takes a lot of pressure off your budget. We estimate that even a modest flatshare in a Hertfordshire town could cost at least £500 p/m, plus bills (around £100).

You’re also saving a substantial amount of money by eating at home with your parents most evenings. If you were to cook yourself, you would expect to spend between £30-£40 a week on groceries.

However, even taking both these things into account, you’re still keeping your weekly budget extremely low. How? Basically, you’re following the golden rule of budgeting, which is to live well within your means.

Rather than stretching that salary to its very limit each month (which you could easily do), you live as if you are earning much less. This will put you in good habits well ahead of getting on the property ladder, when your outgoings will be much higher. It is very easy to fall into the “lifestyle inflation” trap, as you mention. But with your great attitude to spending, you’re not heading that way!

Because your weekly spend is low, it’s OK to budget for a few “splurges” when Black Friday comes around. A good way to ease your guilt over this is by auto-saving small amounts into a specific account that you can access easily and is reserved for treats.

*Name has been changed.

How I Save is a weekly series about how people spend and save, out every Thursday. If you’d like to anonymously share how you spend and save – and get some expert advice on how to sort out your finances – get in touch by emailing ellen.scott@metro.co.uk.

If you want more tips and tricks on saving money, as well as chat about cash and alerts on deals and discounts, join Money Pot, our new Facebook group.

MORE: How I Save: The 30-year-old web developer earning £40,000 a year with £10,000 saved

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MORE: How I Save: The 28-year-old teacher in London earning £38k with £5,000 saved



source https://metro.co.uk/2020/01/16/save-25-year-old-software-engineer-83000-saved-12069767/
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