Sarah Pennells, founder/editor of finance website for women Savvy Woman
How much should people aim to save each month?
"Ideally, you want to have enough cash in an easy-access savings account to see you through six months, but three months’ expenses is good to aim for initially. So set a timescale by which you want to save it and work out what you need to save. As a rule of thumb, saving 10% of your salary (after tax) can be a good starting point. If your take home pay is £1,750, you should save £175."
What percentage of one's salary should go towards rent?
"The average figure is currently less than 25% of take-home pay, but some have to spend more than that. Ideally it should be less than a third of your take-home pay or you’ll be left with very little for travel, food, and other necessities. It will depend on factors such as whether bills are included and how near to transport links and/or the town or city centre you are. Saving £100 a month on your rent doesn’t make sense if you spend £200 more on your commute to work."
What is the biggest waste of money for Londoners?
"Most Londoners spend a lot of money on commuting, but it’s probably not seen as a waste of money! Most of my friends who find money slips through their fingers end up spending a lot on lunch. Making your own lunch may seem a bit grown-up and sensible, but a sandwich and drink can easily cost £5 a day, or £125 a month. After a year that’s £1,500, enough for a fab holiday or to help clear your credit card debt!"
What are your rules for using a credit card?
"Credit cards can be useful. Not only do they give you valuable consumer protection if things go wrong, but they can also help improve your credit rating if you’re thinking of applying for a mortgage. But they have to be used with care! Don’t apply for a credit card if you’ve already maxed out your existing ones as, depending on your situation, you are likely to be turned down. Use cards for extra benefits (such as reward points or cashback) and aim to pay them off in full every month. Don’t think of a credit card as ‘free money.’ It’s actually a debt card but that’s not such as sexy name!"
Any other tips for spending smartly?
"Shopping smarter means getting the most from every pound you spend and working out what’s a good buy. Compare prices online, use vouchers (whether you’re shopping or going out for a meal), and try haggling if something is beyond your budget. I use a couple of loyalty cards, but I don’t have a purse full of them. They can be a great way of being rewarded for your spending and you can sometimes make your money go a lot further with special deals linked to reward cards."
What are bad spending habits Londoners should break?
"I’d say there are two bad habits that Londoners should break; firstly, buying lunch every day and secondly, taking taxis! I’m not a massive fan of sandwiches so I prefer to make my own salads, soups, or risottos. Tastier and much cheaper! And even though I’ve lived in London for years, I still resent paying £10 for a taxi ride down the road, so I use tubes and trains as much as I can. Whatever your money-wasting habit is, you can easily find it by keeping a spending diary for a month (you can easily do it on your mobile). Write down how much you spend and what you spend it on. I promise it will show you where you can make cutbacks!"
Is it better to save, or pay down debt?
"In general terms, you should always pay down expensive debt before you start saving. Having said that, if you have no savings at all (to cover emergencies) and your debts are manageable, it may be worth building up a buffer of a couple of hundred pounds so you’re not forced to borrow if disaster strikes. I’ve seen people turn to payday lenders because they have no savings at all. Not only is that an expensive way to borrow, but you could find some lenders see you as a worse credit risk as a result."
Any apps or programs you recommend for staying on a budget?
"There are a few I’m aware of, such as Savings Goal
, which does what it says on the tin and lets you set a goal for how much you want to save or Bill Assistant,
which costs 69p and helps ensure you don’t miss a bill payment. The debt information organisation Credit Action has a great budgeting app called Spendometer
which lets you set a budget and log your spending."
Photo: Courtesy of Simon Brown