I’m useless with money and can’t seem to save at all especially with the current price rises. How can I break this habit and save for items I need rather than borrow?

During the current cost of living crisis, we could all do with a bit more money. There are countless different ways to add to your savings pot, many of which are easier than you think to achieve.

The tips below can help you to reach whatever financial goal it is you’re striving for.

1. Automate your savings

For those of you who have a fixed monthly income, it’s a smart idea to set up a standing order from the account your wage goes into to be automatically transferred to your savings account each month. Ensure that the amount you choose is realistic for you, and that you can still afford your monthly outgoings and any disposable income-type spends you usually pay out. This will reduce the likelihood of spending these funds to cover any unnecessary expenses. Plus, you know exactly how much you’re saving each month, meaning it’s easier to plan.

2. Budget

We get it, the word ‘budget’ is easier said than done – especially if you have a busy and sociable lifestyle. But, once you learn how to control said budget, you’re in control of your finances. This can help you to efficiently save each month. The most common method that my clients find the easiest and most effective is the 50/30/20 rule. Here’s a quick rundown on how it works:

50% of your income on ‘needs’, or essentials

Strive to spend no more than 50% of your after-tax income on your needs. These include rent/mortgage, electricity, gas, broadband, mobile phone, food, insurance, petrol, public transport, childcare etc.

We should acknowledge that for many, spending 50% on these things is all well and good in theory, but realistically, it often equates to more, meaning you will have to make up the difference from another section. In terms of saving, this requires reducing your spending limit on any ‘wants’

30% on ‘wants’ and non-essential spending

30% of your income after tax can be spent on ‘wants.’ These are any ‘non-essentials’ that you like to spend your money on, but could also live without, including: days out, non-essential groceries, Subscriptions, restaurants, holidays, etc. Again, if you know your ‘needs’ budget requires extra, take a look at this section and cancel out the least important things. For example, if you’re partial to a Friday night takeaway, opt for a ‘fakeaway’ instead. Or try and opt for ‘no spend’ days out where you head to green spaces or the beach with friends and enjoy your downtime without making a dent in your wallet.

20% on paying off debt and/or topping up your savings

Your savings are typically reserved for unexpected expenses (rainy days) and investing in your future. Other things that fall into this category include overpayments on loans to help you pay off existing debt and eliminate future interest. When budgeting, try to use 20% of your income after tax to deal with any of the above

3. Put a spending limit on your card

A lot of banks allow you to set a limit on how much you spend on your credit/debit cards. This helps to prevent overspending and encourages you to regularly check over your finances to assess your daily expenditures and what you can afford.

4. Cut back on your utility bills

Did you know that your utility bills aren’t set in stone, and you can query whether you’re overpaying? If you are, change energy provider. Do your research into who’s the cheapest energy provider and switch to ensure you’re on a lower tariff. This could literally save you hundreds monthly.

5. Cancel any unused subscriptions

How many of you pay for one or more subscription services that you rarely – or ever – use? The best way to check if you’re unknowingly paying for something you signed up for months (or years) ago, is to look over your bank statements. Anything you spot that you know you don’t use anymore, cancel it straight away.

6. Think before you make a big purchase. 

with Philip Cullen of Southeast Mortgages & Financial Services
This article aims to give information, not advice. Always do your own research and/or seek out advice from a Financial Broker before acting on anything contained in this article.

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