Did you know that the joy of a pay rise gets old hat after just six weeks?
That’s what the people at Direct Line found. They said (and I’m sure you’ve experienced this too) that in just the next month after people get their pay rise, they end up spending more and find themselves in the same situation as before
Want to get rich? Want to trick yourself into saving and investing more than you could imagine?
Be a MoneyMagpie and live one pay rise behind yourself!
That’s right. Real MoneyMagpies ignore pay rises and put all (or at least some) of the extra cash into investments and carry on living as though they hadn’t had that rise.
- Be a MoneyMagpie. Live one pay rise behind
- Be sneaky with your savings
- How much can you make by living one pay rise behind?
According to the research by Direct Line, the first items that Brits splash the cash on following a pay rise are more expensive alcoholic drinks and switching to premium lunchtime meals, such as changing from Greggs to Pret A Manger.
To be honest, that’s fair enough as it’s nice to have a bit of a boost here and there if you get some more money.
But, the extra spending should be small. The big thing to think about when you get a pay rise is how much you can put away for your future.
In fact, Direct Line found that people who were more sensible with their new-found wealth chose to put their additional income into savings (71 per cent of them) with almost a third doing so immediately.
And that’s the secret: Do it immediately!
the secret to building up money without realising it!
…is Standing Orders.
Yes, that’s all you need.
Just set up at least one Standing Order from your current account to a savings account and, ideally, into an investment like an equities ISA or a personal pension.
Set up the Standing Order(s) to go out at the beginning of the month (or whenever you get your pay) so that the money goes out right at the start before you spend money on restaurants, holidays or clothes.
pay yourself first
This is how you ‘pay yourself first’. Think of it that way because that’s what it is. You are paying your future self before you pay the clothes shops, pubs and travel agents.
The money you put away now will grow – particularly if you put it into an equities ISA or a pension – so that your future self will have enough money to have a comfortable life later on.
Don’t wait until the end of the month because you won’t have any money left then. Nobody ever does!
Do it at the start and let it be done automatically, that way you never have to think about it. It just does it for you.
There are lots of other ways to get yourself to save without really noticing it.
You can see at least ten ways in our sneaky ways to save article here.
It includes things like:
- Picking a particular coin that you will save in a jar each week. Any time you get, say, a £2 coin or a 50p coin you put it into your special jar. By the end of the year this jar could pay for Christmas.
- Get walking. Make yourself walk more instead of taking the bus. Each time you do, put the bus money into a jar. Once you have £20, put it into a savings account. You will be fitter and richer by the end of the year.
- Set up a bad habits box. Any time you eat too much, or swear, or watch too much TV you can ‘charge’ yourself. Even if it’s just 10p each time, putting that into your money box will help you build up the cash.
Let’s assume that you would be getting, net, an extra £200 a month.
If you live on the old amount and put the extra £200 a month into an equities ISA at an average return of 6% a year, then after ten years you will have £33,300. Not bad eh?
So be a real MoneyMagpie.
Live one pay rise behind and see that money mount up.