Money Saving Strategies – Our Top Tips For 2018

Hopefully, some of the tips elsewhere on the site have given you some ideas for areas of your life where spending could be cut. The next question to address is what the best way to save this money could be. There are dozens of saving strategies to choose from, so selecting the right method for you can often feel like a challenge.

Below are a few strategies you might want to try, alongside the kind of financial situation they are most likely to work for.

Pay Yourself First

  • How it works

This method is fairly straight-forward: treat your saving commitments as another necessary monthly expense just like utility bills, rent, or grocery shopping. Work out what you can afford to set aside each month, and set up a direct debit into a separate savings account, ideally to come out soon after you have been paid.

  • Good for

This technique is good for people who struggle to stick to budgets. By deducting savings from your income as soon as it is paid, you can easily see exactly how much you have left to live on for the rest of the month, and don’t risk dipping into funds which you had ear marked for saving. The method can also help curb the spending of impulse buyers; if your disposable income is not readily available, because kept in a separate account, you are encouraged to really think through each purchase.

  • Advantages

This is a simple but effective way to save, and provides a helpful framework for thinking about savings – as another necessary expense rather than a separate special effort. With this kind of discipline, you can amass savings fairly quickly.

  • Drawbacks

If you are not experienced in sticking to a fairly strict budget, setting aside some of your income does run the risk of leaving you short at the end of the month, at least until you adjust. You might also be unable to save the same amount every month, meaning an automatic transfer might not be the best option.

Save the Change

  • How it works

This time-honoured saving method can serve many of us just as well in the twenty first century. The premise is simple: whenever you buy something with cash, set aside any coinage change in a piggy bank or jar. Although this technique probably won’t build significant savings on its own, it can be a powerful supplement to your saving efforts, and is a pretty good habit to develop.

  • Good for

If you struggle to set aside larger amounts of money all at once, starting with this technique might serve you well. We tend to miss money less when it leaves our bank accounts in smaller denominations. This can be a real issue when it comes to spending, but it can be turned to your advantage with this kind of saving.

  • Advantages

The advantages of this technique are fairly self-evident: save small amounts of money regularly, and you will end up with some degree of savings without really noticing the money missing from your account.

  • Drawbacks

The main drawback of this method is the fact that our spending is, more and more, revolving around debit cards and online payments rather than physical cash. You could combine this method with cash-only spending, to encourage sticking to a budget, or consider installing an app which rounds up your transactions to the nearest whole pound and saves or invests the difference.

Try a Savings Challenge

  • How it works

The savings challenge can come in many forms – the 52 week saving challenge is one popular incarnation, but it could be anything from committing to save every five pound note you get, to cutting spending in a specific area and saving the difference.

  • Good for

Framing saving as a challenge is a great idea if you have a competitive personality – especially if others take the challenge alongside you.

  • Advantages

Completing a challenge is inherently rewarding, no matter what its nature, so using this kind of saving technique can be a lot more motivating than more traditional methods – an end goal is clearly and consistently in sight. Undertaking the challenge alongside others also encourages a supportive network to keep you going.

  • Drawbacks

The main drawback of savings challenges is that they might not be sustainable in the long term. If you ‘fail’ the challenge, you may also be put off further efforts to save in the future. Remember that challenges can always be adapted to better fit your circumstances.

The 50/30/20 Rule

  • How it works

This is a simple rule of thumb for how to split your income. 50% is spent on “needs” – necessary expenses such as bills, food, and rent or mortgage payments – 30% is dedicated to “wants” – eating out, cinema trips and the likes – while the final 20% goes towards savings.

  • Good for

This level of saving is most likely to be possible for people with higher incomes – who only need to spend 50% of their earnings on basic living costs. The rule offers a simple way to organise your finances without having to break down spending into myriad categories.

  • Advantages

Consistently setting aside 20% of your income is a fairly quick and simple way to build your savings, and the method also encourages users to think critically about their spending habits by distinguishing clearly between “needs” and “wants”.

  • Drawbacks

On a lower income, it is likely that more than 50% of earnings will be dedicated to “needs” each month. It is possible to adjust the percentages, but this does not really allow for any flexibility on a month to month basis.

Not all of these methods will work for everyone, but hopefully one or more will fit in with your own personal spending habits. It is also totally possible to combine or utilise a hybrid of two or more methods to maximise your savings.

If you are having trouble setting aside savings because of debt obligations, getting in control of this could be a more valuable step towards getting your finances under control. You can read more about solutions such as a Debt Management Plan, Individual Voluntary Arrangement (IVA) or Protected Trust Deeds by following the links. Good luck saving!

 

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