HALF of us are spending ALL the money we earn every month.
And high earners on £90,000 a year are just as likely to blow their entire salary as those on £9,000, new research has shown.
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So how can you ensure that you put something aside for a rainy day?
Warren Shute, financial adviser and author of The Money Plan, shares his top tips on how to be a savvy saver
How to split your earnings
1. Spend
Half of your earnings should be in a current account to pay utilities and your mortgage or rent.
This money should stay in the account in which you receive your income and should only go towards paying bills.
Keeping everyday spending separate from this account is a good idea so you don’t fall behind on crucial payments.
2. Splurge
Thirty per cent of your monthly income should go towards variable spending items such as food shopping, fuel and any little treats.
I call this “walking about money” or WAM. Pay 7.5 per cent of your income into this pot weekly to avoid spending it all at once.
If your bills are higher than average or you live in an expensive area, try to lower your WAM percentage.
3. Save
Twenty per cent of your salary should go towards savings.
I advise my clients to use this portion of their income to build up a £1,000 emergency fund then pay off debts.
When you no longer owe any money, you can use this pot for long-term goals such as holidays and property investment.
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Best accounts
IF YOU’RE FORGETFUL: The app Monzo puts your finances into separate pots. You won’t make any money on this account but it’s helpful for tracking your WAM spending.
FOR FIRST-TIME BUYERS: Open a Lifetime Individual Savings Account (LISA) and put in up to £4,000 each year. You must be aged 18 to 39. The Government will give you a 25 per cent bonus, up to £1,000 annually.
IDEAL FOR REGULAR SAVERS: The M&S Monthly Saver account pays out five per cent fixed interest each year. You must put away between £25 and £250 every month but you cannot withdraw within that year.
FOR FLEXIBILITY: The Marcus account from Goldman Sachs offers unlimited withdrawals and 1.45 per cent interest each year.
IF YOU LIKE PAYOUTS: Put your £1,000 emergency fund in a premium bond. Returns are low — typically about £25 in the bond’s monthly draw — but the bonds are backed by the Treasury so they are guaranteed.
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Debit advice
SEEK CLARITY: If your debt feels out of control, list your income and what you spend per month. It will help you feel more confident about solving the problem.
DON’T CONSOLIDATE YOUR DEBT: Having one huge amount of money to pay off can be daunting. Break what you owe into smaller chunks and it will feel more manageable.
USE THE SNOWBALL SYSTEM: Pay off your smallest debts first and “snowball” your way up to the biggest. Little successes will encourage you to keep going.
FREEZE YOUR CREDIT CARD: Literally. If you overspend, put your credit card in a bowl of water and pop it in the freezer. If you want to buy something on credit, this will give you time to think it through.
BE KIND TO YOURSELF: We tend to think of ourselves as stupid if we do not know how to look after our finances but getting on top of your money is a long-term goal. It is not going to happen overnight.
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Savings advice
BE FLEXIBLE: You might need to put more than half your income towards bills each month. If you do, make full use of comparison sites such as idealo.co.uk to get the best possible deals on what you buy.
PENSION PLAN: Even if you are a low earner, make sure you sign up for a workplace pension.
MAKE A WILL: Ensure your hard-earned cash goes to the right people after you die by drawing up a will.
FOLLOW THE RULES: Dealing with money can be emotional but you can take some of the pain out of it by following a saving structure.
TREAT YOURSELF: Spending your cash is not a crime but knowing you are in control of your finances will help you enjoy it more.
