Can I still enjoy a summer holiday while saving?

Despite spending all day writing about managing finances, I have a very poor temperament when it comes to money. But one thing I cannot ignore is the power of investing.

I am a sucker for a ‘sweet treat’ to celebrate any occasion, or to comfort myself after a slight disappointment (and one of those situations seems to arise daily). I’m partial to an Instagram ad, and I refuse to sit out on plans.

Frankly, it’s not a good combination for the wallet. And especially when summer rolls around and the weather starts to call for trips to the pub garden, the spending can rack up quickly.

But the benefits of investing, even if you are starting small with contributions, can take your money a long way. If you put aside £50 each month for 10 years, you would accumulate savings of £6,000. This is far better than nothing, but with investments, this amount could go further. If you invested that money instead, with a return of 5% each year after charges, you’d up your amount by nearly £2,000, to £7,764. This is just an illustration and investment returns are not guaranteed.

If you upped your investment to £100 each month with the same return, in 20 years you would accumulate over £41,000; this is a very strong start for a house deposit or savings for education.

How much is right for you?

Most advisers recommend putting away between 10 to 20% of your annual salary, but if that is not doable for you at the moment, any small amount truly makes a difference.

For reference, the average ISA holder with an income between £20,000 and £29,000 has about £31,000 saved. This figure rises only slightly for those with an income between £30,000 and £49,999, according to the HMRC.

As simple as it seems in mathematical terms, money is viewed by most people emotionally. And sometimes, mental tricks can be the easiest way to make room for all the things you want to fit into your budget.

Budgeting for savings

For example, when I receive my payslip, the first thing I do is make all my essential payments, such as rent or mortgage and bills, and put aside the money I plan to invest. It makes my current account balance look much less attractive, and this is a good thing: I don’t feel like I have more money to spend than I actually do.

It can be tempting to keep the money you plan to delegate towards savings in your account until the end of the month and then invest it. But this method requires a good amount of self-control, and if you wait to just invest the leftover funds you have at the end of the month, you may often find that number is much smaller than you originally planned for.

If it fits your investment goals, you can also choose to do this by increasing your pension contributions. If you have a workplace pension, this money will be removed from your monthly salary payment without any need to split out the funds yourself. You might receive the bonus of a higher contribution from your employer as well.

While this will build your wealth in the long term, for the immediate future, it may leave the wallet feeling a little slim. But there’s a lot of simple things you can cut down while still enjoying little luxuries.

There are a few different ways that you can go about pulling back spending. Some people prefer to cut out a holiday or two for the year and continue life same as usual otherwise. You can also take the path of making a lot of small cuts in different places.

This could mean tins in the park or wine in the home garden instead of beer garden pints, or trading a few more takeaways for home-cooked dinners. Whether or not those around you admit it, they are probably happy to save a few extra pounds too. Here’s an old adage we have all grown to hate: giving up your morning coffee run.

Frankly, I won’t be. At least not every morning. But if I spend £4 on a coffee each day, over a month that adds up to £124. If my goal is to save £100 each month, that still means 6 days of coffees, which could be a nice treat for the weekends. It’s not going to make you a millionaire, but it’s a good start to a comfortable life.