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Can your good lockdown savings habits outlast the pandemic?

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There is no doubt that the COVID-19 pandemic has made many of us re-assess the way we save and spend.

While it’s spelled the beginning of a period of financial uncertainty for many of us, it’s also provided a unique opportunity to reduce spending considerably. Brits have put a record amount of money aside during lockdown, with billions of pounds stashed away for a rainy day over the last four months.  

This is no surprise, considering most of us have faced enormously reduced outgoings – saving money on commuting costs, morning coffees, lunches and dinners out.

But will these new habits translate into long-term behavioural changes, or will we be back to pre-pandemic spending as soon as ‘normality’ resumes? With many of us hoping to save a little more in the long-term, here are a few tips to turn your lockdown spending patterns into permanent habits.

1. Conduct an audit

It’s important to get a real understanding of exactly where you’ve saved money during lockdown, and how this compares to spending prior to the pandemic.

The first step is to conduct an in-depth spending audit and to identify what savings habits you can realistically take forward. Write down what you’ve spent in the last four months, compared to the three months prior, split into categories such as groceries, commuting, utility bills and leisure.

Think about how costs will adjust and make some predictions. For example, you will likely spend more money on socialising now some of the restrictions are lifting, but the price of groceries and utility bills will probably reduce if you’re spending less time at home.

If you’ve saved £400 on commuting but will be returning to the office in the upcoming weeks, commuting costs will inevitably rise again. However, there might be other ways you can save money around your office routine aside from the actual cost of travel, for example on breakfast, lunch and coffees. Equally, if you’re going to be working from home for the foreseeable future, make plans to continue to put aside the money you would be spending on commuting.

2. Make some permanent spending changes

Once you’ve done your audit, the next step is to really think about the habits you want to take forward for the long-term. It’s probably unrealistic to expect to continue saving at the same rate as you have during lockdown, however you will probably have a very clear idea of the things you can happily live without or spend less on.

Consider the things that you haven’t missed as much as you expected during lockdown. Maybe you feel like you’d happily sacrifice your morning latte, or that your home workout routine feels like a great long-term alternative to a gym membership. Maybe you’re happy to commit to batch cooking and more home-cooked work lunches.

Equally, consider whether there is a more cost-efficient way to do the things you have missed. Maybe you’ve found socialising at home with friends just as enjoyable as going out for pricier meals, so want to make this a more regular occurrence, for example.

3. Set tangible targets

Once you’ve got a clearer idea of the changes you want to commit to on a permanent basis, the next step is to set tangible savings targets for the next three to six months.

Consider a ‘minimum’ and ‘ideal’ savings target. The ‘minimum’ target should be realistic and very achievable, while the ‘ideal’ amount should be a more ambitious goal. Set up a regular payment for the ‘minimum’ amount to leave your account on payday, to be put into a separate savings account.

Then, set yourself some weekly budgeting goals that align to your ‘ideal’ savings target. At the end of each month, transfer any additional money saved on top of your ‘minimum’ target into your savings. Even if you don’t manage to align your spending to your ‘ideal’ goal each month, this method gives you a level of flexibility, which will make saving feel less restrictive and more of a positive experience.

4. Review your savings portfolio

The final step is to carry out a review of your savings portfolio and consider the kind of accounts that are best suited to your needs.

If you’ve saved a lump sum during lockdown, consider if you’re able to earn additional interest by putting your money in a fixed rate savings account. Make sure you also have savings put aside that are easily accessible should you need quick access to your cash.

Finally, take the time to really consider your savings aspirations and the best accounts to help you achieve those. If you’re saving to buy your first house, for example, it might be a good idea to open a Lifetime ISA, which offers a generous 25% government bonus on your balance.

5. Review and repeat in six months!

At the moment, it’s not easy to predict what the next few months will look like. We recommend you repeat steps 1-4 every few months and adapt your savings habits accordingly! 

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Paragon Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England number 05390593. Registered office 51 Homer Road, Solihull, West Midlands B91 3QJ. Paragon Bank PLC is registered on the Financial Services Register under the firm reference number 604551