How to Save Money
Saving is not the most exciting thing in the world. But it is essential.
There are certain life goals, events and landmarks that require large sums of money. For the average person, the only means to access these large amounts is through saving.
While the cost of living is at an all-time high, reaching your saving goals is easier than you think.
All it takes is patience, dedication and small changes.
For many, the hardest part of saving is getting started. There are always bills to pay, something that needs repairing or a celebration you need to buy gifts for. It is often difficult to see past those things and start the process of saving.
However, saving is not impossible, and this article will help you to:
- Set financial goals
- Make a budget
- Identify ways you can easily save money
People save for many reasons. The most common are to:
- Buy a house
- Buy a car
- Fund a wedding
- Have a large sum of money available in case of a medical emergency
- Be prepared for unexpected situations such as redundancy or a pandemic
- Pay for college or university
- Have a retirement fund
Some people also like to have a certain amount of money set aside in a savings account just for peace of mind.
As you never know what tomorrow will bring, it is always best to be prepared.
Before you start saving, you need to familiarize yourself with your finances.
As saving is a long-term goal, it is best to begin with a 12-month overview.
For each month, write your salary, not including any expected bonuses. Then deduct:
- Any tax and insurance
- Housing costs such as rent, mortgage, utilities
- Credit card and loan payments
In short, any recurring and mandatory bills.
Next, go through each month and note any additional payments you need to make, such as:
- Car service
- Religious holidays
- Subscription renewals
Once all the mandatory costs have been deducted, decide how much you need for everyday spending such as food and travel.
Remember, at this stage, you’re only considering the essential outgoings.
After all the essential costs have been deducted from your salary, you need to decide what to do with the leftover amount.
Not every month needs to be the same.
Perhaps one month you could save 70% of what’s left, and the following month 30%.
It all depends on your situation.
People with children have more essential outgoings than those without. Those who need the company of others will have to allocate a percentage to socializing, leaving less for saving.
But once you understand your finances and the amount you have to work with, you can set your goals.
It may be that for a while, you need to sacrifice some activities, cut back or take advantage of free or cheaper options.
Setting budgets and financial goals is all about finding what you are willing to do and what works for you.
One common method of budgeting and saving is the 50/30/20 rule.
According to this system, you should dedicate:
- 50% of your after-tax income to the mandatory payments
- 30% to your wants and non-essentials
- 20% to savings and debt repayment
However, this is only a guide and may not work for everyone.
Some people’s rent is 50% of their income, and they still need to cover utilities and food.
Others have low housing costs and can use some of the mandatory percentage to pay off debts or save.
No matter what your situation is, there are always ways to save money.
The five tips that work in every situation are:
- Know your expenses and have a budget – Understand your finances inside out and use apps to track how much you have spent and how much of your budget you have left.
- Set goals – Targets and goals are great at keeping you motivated as you know what you are working towards, why you are doing it, and how close you are to succeeding.
- Automate savings and bills – This helps you to avoid paying late fees or missing essential payments. It also means you don’t have to think about them because they are automatically taken care of. Most online and digital banks have automatic saving features that you can set up through your phone or computer.
- Wait before making non-essential purchases – Some financial advisors will tell you to wait 30 days before making a non-essential purchase; others will say 24 hours. But the idea is that you don’t buy the item right away. You wait a set period, and if you still really want it, then buy it.
- Factor in unplanned expenses – Don’t allocate all of your budget. Leave a portion for unexpected costs.
There are limitless ways to save money. Depending on your spending habits and situation, some ideas work better than others. They can also be adapted or applied to other areas.
Look out for any balance transfer offers on credit cards.
It won't eliminate the debt, but it will give you an interest-free period. Make sure you make the most of it.
All late payments carry a charge.
Make it a habit to pay for everything early or on time so you aren't losing money unnecessarily.
It may not be a considerable amount, but over time the little charges add up.
Companies are always looking for new customers, so they constantly run offers to tempt you.
When you get close to the end of a contract, shop around for providers with lower fees or special offers.
Try it with:
- Phone providers
If you like your current providers, see what the competitors are offering and ask your current provider to match that offer, or give a better one.
Before making any purchases, check comparison sites for the best deals.
Which? is a highly comprehensive site that provides brand comparisons across five different categories.
Tracking every transaction you make will help you see where you are overspending and how quickly little transactions add up.
If you have set a budget, a tracking app will help you stay within your limits.
Cancel any subscriptions you no longer use.
Equally, you can choose cheaper options or use the free features.
For those subscriptions you can't live without, try to pay for yearly memberships upfront.
It is a large sum of money initially, but the annual subscriptions are usually discounted – sometimes 40% or more.
If you live within a reasonable distance of your office, swap public transport for cycling or walking.
Not only will this improve your mental and physical health, but it will save you money.
Shopping when you are hungry is the worst thing you can do, both for your bank balance and your health.
You will be tempted to fill the cart with snacks and all the food you are craving, rather than the food you need.
Before going to the supermarket, plan your meals for the week, and make a list of all the ingredients you need.
Use any vouchers or coupons you may have, but only if you need the items.
Shop at local markets or multi-cultural stores for more competitive prices.
Bulk buy ingredients you use often and take advantage of multi-buy offers.
It may not save money on that particular shop but will be more economical in the long run.
Make sure that you are only buying the products you use. Just because something is being offered at a buy-one-get-one-free discount, it doesn’t mean you should buy it.
If you eat out frequently, consider investing in a dining club membership.
The Dine Club offers yearly memberships for £49.99 and has 50% off at over 5,000 restaurants, up to 50% off theatre tickets, and up to 40% off cinema tickets.
Cooking at home, making packed lunches and meal-prepping saves money. You won't be tempted to go out for lunch or dinner because you already have something prepared.
You will also be less tempted to buy extras like wine, coffee, starters and desserts.
Taking lunches into work may not always be tempting, but it will save you a lot of money by the end of the month.
See if any free events are happening in your community.
Check for local concerts, open cinemas and festivals.
Some events may not be free, but they will be cheaper than traveling out of town or going to a movie theatre.
Instead of arranging big nights out, opt for nights in.
It doesn't need to be anything fancy – just a friendly get-together. Each person can bring some food or their own alcohol.
You could order in food and split the bill.
Not only are you saving on travel expenses, but you will also be less tempted to buy extra rounds of drinks.
Since the advent of ebooks, audiobooks and cheap book deals on Amazon, there hasn't been the same need for libraries.
However, they are free to join and have a wide range of books, movies and games that you can rent for free.
If you read a lot, consider borrowing from the library rather than buying new books.
Almost every retailer has their own loyalty or reward card.
They usually have a points system where you can earn vouchers, money back or freebies.
Make use of any points, coupons, offers or vouchers that they send you if they are of use.
Do not use them for the sake of it – that would be a waste of money.
Many of us feel uncomfortable haggling.
But to get the best price and save money, you may need to engage in some negotiating.
Before handing over your money, ask for a discount. Some retailers are told that if a customer requests a discount, they can give 10% or 15%.
You may not always be successful, but it’s worth a try.
Plus, the more you practice, the easier it will get.
Before making any non-essential purchase, stop and think if you really need it.
Ask yourself what purpose it serves and if it will add value to your life.
If the answer is no and you want that item for instant gratification, don’t buy it.
The idea of second-hand or pre-loved doesn’t appeal to everyone. But the consumer market has changed so much that second-hand items are no longer years old. They have often only been worn once or twice.
If you are looking for something new to wear, and you know that you will only wear it once, explore the pre-loved sites first.
Equally, maybe you could sell any items you no longer need on re-sell apps and sites.
While eco-friendly items are usually more expensive to buy, they are often reusable and save you money in the long term.
Carry out home improvements yourself to save money.
Sites like Pinterest have many ideas about saving money while improving your home or transforming IKEA furniture into something unique and expensive-looking.
Of course, there are some jobs that you do need a tradesperson for. But if it is something you can do, why not see where your creativity can take you?
While the idea of saving for your first home or a retirement fund is exciting, the actual process isn’t.
Before starting your saving journey, decide on your goal and remind yourself of it every time you want to spend.
It is also important to remember that you won’t be in saving mode for the rest of your life. The sacrifices you are making now serve a purpose, whether that be financial security or an investment.
When that target is met, you can enjoy some freedom before you decide to save again.