Saving money is an essential life skill that everyone should learn, especially with the rising cost of living. Having the ability to save cash will also help you prep for better long term financial security, regardless of whether you need money for a particular goal, want to build an emergency fund, or are simply looking to boost your financial health.
Developing the necessary discipline to save can be tough but there are some simple solutions you can employ that will help the process along. No matter how badly you’re currently struggling to save, there are several strategies you can immediately start to use that will definitely help you better manage your money over time.
1. Create a budget
Getting a financial plan in place that incorporates your outgoings and your income will let you get a bird’s eye view on where you can cut costs. By identifying unnecessary expenditure, you can see where you could save money instead, so it’s a crucial step that you definitely shouldn’t skip.
Jot down your monthly expenses
Kick start the process by making a note of your expenses for an entire month – from rent to your morning coffee. You can make use of apps or spreadsheets to track spending, or if you prefer, just jot down your expenditure in an online or offline notepad.
Sort your expenses into categories
Once you’ve logged all your outgoings, organise them into categories, such as essential payments like rent, leisure expenses, groceries, and bills. This will give you a clearer idea of your spending habits and will help you spot where most of your income is going. It will also help you see how much you are spending on items that you could possibly do without.
Set specific and realistic savings goals
Decide how much you want – and can afford – to save on a monthly basis. This figure should be realistic, as you want to be able to achieve it regularly – but it can change over time, according to your needs. You could start off by saving more, or start by saving a little, with the aim to boost the amount, if your earnings or cash flow increase over time. Get as specific as you can as to the why – i.e. make a statement like “I need to save £200 per month for my Ibiza holiday in 7 months.”
Remove unnecessary spend
Once you’ve laid out your savings target and identified your regular spending patterns, you can begin to look at areas where you can cut back. If for example, you spend excessively on eating out, or on luxury items like a daily coffee or magazines, you could look at reducing your expenditure, or trying out more economical alternatives.
Keep at it
Consistency is the key to successful saving, even if you fall down once in a while and make too many unnecessary purchases. If over the long term, you basically stick to your initial budget, you’ll develop better control over your finances. It’s important to constantly assess your spending too, so you can adjust as needed to stay on track.
2. Automate Your Savings
If you’re having trouble remembering to save regularly, employing automation to do it can be one effective solution. Doing this will allow you to easily set money aside, without having to manually take the time do it yourself, making it easier to save painlessly.
Have a dedicated savings account
You might think about opening a separate savings account, where you can direct a set amount every month. Most banks will let you set up a different savings account or even several, to help you better organise your money.
Automate the amount you save each month
As soon as you’ve decided where you’ll save your money, you can set up an automatic transfer, for a set monthly amount, to be transferred from your primary bank account. You These automatic transfers can be scheduled to sync with the day you get paid, helping you put aside a specific sum as soon as you get it, so you resist the temptation to spend.
Raise the amount you save over time
If your financial situation changes, you might want to consider adjusting the amount you save, especially if it improves. Taking a gradual approach based on your situation lets you tweak at your own pace, allowing you to save less when you really can’t afford it – and more when you can.
3. Reduce your debt
Having a lot of high-interest debt, like outstanding credit card balances, can really drain your finances and reduce your ability to save cash. Getting rid of debt is a critical step to take if you want to boost your saving’s power and though it may seem intimidating at first, there are several ways you can tackle this problem.
Prioritise high-interest debt first
Start by placing the focus on clearing the debts that carry the highest interest rates, like the balance of your credit card. If you can pay these off, you’ll save a fortune in interest down the line.
Craft a debt repayment plan
Lay out a workable plan for paying off all your debts, starting with the smallest and working up to the largest amount. Once you’ve got them down and can see clearly what you owe you can take one of two approaches, as you can choose to clear the lowest amount first, then the next lowest and continue in this way. Or, you can choose to clear the largest debt and then work your way downwards, depending on your immediate ability to pay.
Avoid taking on any new debt
If your goal is to maximise your savings, then as well as making a concerted effort to clear your existing debt, it’s vital to avoid incurring any new debts. If you need to take drastic steps to reduce spend, you might want to think about cutting up your credit cards, if that is what it takes to prevent you from giving into impulse purchases.
4. Expand your earning opportunities
It’s not just about saving money and clearing debt, as by boosting your income, you’ll also have the ability to save more cash. Looking at ways to earn more can be extremely helpful in helping you increase your budget, so it’s a good idea to examine ways to expand your income opportunities.
Brainstorm side hustles
Your main income may be what you depend on but if you diversify your skillset, you could also create opportunities for part-time cash flow. Is there a way you can use your talents and knowledge to make some easy extra income on the side? If so, you can use this money to boost your savings.
Ask for a raise or promotion
If you work for an employer and you know you’re turning in good work, why not ask for a raise or even a promotion? It’s important to outline your value to the company, so take the time to highlight your contributions and accomplishments before laying out your case.
Invest – but with care
Investing can be a great way to passively up your income but it doesn’t come without its risks. Before you even think about taking the plunge, research investment options that align well with your risk tolerance and financial ability – and never invest any money in high-risk options that you can’t afford to lose.
5. Make the most of bonus windfall payments
Windfalls, like bonuses, tax refunds, and inheritances provide you with a superb chance to immediately boost your savings. It can be tempting to rush out and spend the money straight away instead, particularly when you’re short on cash but by resisting the temptation to spend all of it, you can make much better use of your cash.
Dedicate a specific amount to your savings
Before you even think of using your windfall money elsewhere, allocate a slice to your savings account. Even if it’s only a small percentage, it all counts and if you do this regularly, it will make a big difference.
Pay off debt
If you have a lot of high-interest debt, you can use windfall payments to help clear it, which will help you save on interest payments. Doing this every time you get extra cash will help you clear debt faster and allow you to free up more of your regular income for saving.
Invest for the long term
Make your windfall funds work harder for you by using them to invest in assets that will grow consistently in value over time, like stocks, a pension, or a retirement account.
