Money has a habit of slipping away when you least expect it. Think about the last time you had an unexpected expense — the bathroom flooded, your cat got sick, or you got a flat tire. These kinds of expenses can create stress — even if you have an emergency fund.
On top of that, you never really know when you’re going to need to fall back on your finances. Therefore, learning how to start saving money as soon as possible is crucial. But what are the best ways to start saving without you having to burn too much of a hole in your ‘spending’ pocket?
If you read PFF regularly you’ll know that I’m always sharing new and interesting ways for UK savers to make the most of their cash. However, to really get into the habit of saving, you’ll need more than a flashy app to start you off on the right foot. Keep reading and I’ll share with you my favourite tips to show you how to start saving money in 2022.
Set Clear Goals
If you’re living from payday to payday, saving can seem like a bit of a dream. That’s why you’re going to need to start thinking about setting yourself clearly defined goals when it comes to putting money away. You can start small – why not try saving £1 per day if you can? Then, try and ramp it up – see what happens if you double that amount again and again.
Set yourself clear one-to-five year plans for saving. Think about the bigger things you’re going to want or need in the near future. Having a tangible goal such as saving for a home or saving for university can really be motivating.
You’re not going to be able to afford them if you’re scrambling around for the cash in the here and now. The sooner you get started, the sooner you can start climbing that savings mountain!
Pay Off Your Debt First
Rule number one of getting ahead in your life financially – get clear of debt before you think about how to start saving. I don’t necessarily mean mortgages, car financing, student loans or anything else long-term.
What I do mean is consumer debt. This could be anything you owe on store cards, credit cards, personal loans, etc., etc. The fact is, with a clean slate, you’re going to feel better about saving, and you’re going to find it more comfortable to put money aside, and more likely to succeed with saving for the long term.
There are some circumstances where this might not always make much sense if you’re not accruing much interest on your debts. For example, you might be taking advantage of zero percent balance transfer cards. If you’re steadily accruing interest income on your savings and aren’t building up more debt on a zero balancer, it won’t always make financial sense to clear up your consumer debt rather than saving. However it’s worth considering the phycological impact of having debt hanging over you, even if it is currently sitting on a zero percent credit card. As at some point that credit is going to need to be serviced.
Personally, I’d really suggest trying to clear your consumer debt first before you start making a serious attempt at saving. Take a look at a few budget planners online and take full stock of the money you owe, to who, and how long it will feasibly take to pay everything off. If you have multiple debts I would recommend considering the debt snowball method, made popular by Dave Ramsey. His book, The Total Money Makeover, is also well worth a read to get into that debt payoff mindset. Once you’re clear of consumer debt, you can start to save money without any of that unnecessary guilt or pressure.
Make a Budget and Track Your Spending
Want to know how to start saving money? I can’t stress this enough – you MUST make a budget.
Some people are scared or apprehensive about budgets simply because it means crunching a few numbers. Others might be worried that they will see the full extent of their spending and feel extremely guilty! However, there really is no better way to start to get into the habit of saving.
You don’t necessarily need to track and trace where every single penny has gone. Instead, I’d advise you make a point of looking at your average spends over, say, the past six months. Barring any emergencies or circumstances where you had to spend more than usual, is there any leeway or wiggle room for you to save?
If not, this is where the budgeting exercise really takes off. It’s time to start looking at where your money is going, and if there are any ways you can cut down on the expense. Think about sorting your expenditure into two piles – one for essential expense, and another for non-essential.
For example, while you will likely need to keep your direct debits set up for energy and phone bills, you might be able to cut back on some of your TV packages or subscriptions. If you’re serious about saving, it really will pay to be ruthless. Save any money that you’d normally spend on frivolous expense and reap the rewards.
One of the biggest spends for a lot of people will be food. Is there any way in which you can cut down on your regular food shop?
It’s fairly straightforward to set up your own budgeting spreadsheet if you have a bit of know how with Excel or Google Sheets.
‘Gamify’ Your Savings
Ever heard of gamification? It’s a clever way to make everyday activities more fun. Plenty of people gamify their daily chores or even work when they go into the office. There are also many different ways through which you can gamify saving money.
UK savers can find an element of saving gamification through apps like Plum. A money management app which has gained a lot of popularity based on its automated money-saving and investing features (please note: as with all investments, your capital is at risk).
What’s really interesting about Plum and its raft of extra features through its Plum Pro (£2.99 a month after a free 30-day trial) service is the savings challenge features.
Specifically, Plum offers an automated 52-week challenge – where you’ll save a little bit more each week, automatically, from January through December (or whenever you’d like to start). This works incrementally, meaning that you will save £1 on week one, and £52 on week 52 – making up a total of £1,378 for the year without you having to think about it. Believe it or not, at this pace you’ll be on track to save £100 a month by April!
Saving automation and the challenge aspect is a great way to get into gamification regarding your money. You could set yourself challenges and games to see how much money you could put away for a given period. You can, of course, set yourself little rewards and pickups along the way, too, so that you keep on target.
If you’re the sort of person who likes chasing high scores or setting records, this could be a really interesting and fruitful way for you to save money in the long run. There’s some psychology at work here, too, as you may be the sort of person who is likely to stick to a plan or a target providing there is a reward or promise of a record at the end!
Set Yourself Savings Goals
Goals are so important if you are serious about learning how to start saving money. Goals aren’t anything to be fearful of. They exist to help inspire you do the best you possibly can. That’s why, whenever you do set yourself any savings goals or targets, you need to make sure that you are always being realistic regarding your income and your expenditure. You’re really going to need to get your budget in order if you have any hope to reach goals you set far in the future.
It’s not hard to do long term. However, the best thing to do is to set yourself smaller goals in the first instance. If you really rush into things and go too grand on the final total, you may end up disappointing yourself. Therefore, what you might want to do is set yourself that smaller goal and to double or triple it once you meet it. It’s all about keeping yourself going.
Momentum is key in all walks of life, but particularly when it comes to money. Saving, cutting back and even making money all require you to be consistent and to stick to your guns.
Here’s an idea: try setting a goal of saving £100 a month initially. Then once you’ve comfortably reached that goal, set an ambitious goal of saving £500 a month. It might seem impossible, but even if you reach £250 a month, you’re in a great position!
Consider an Automatic Savings App
Technology when used wisely can be a wonderful thing! The best apps to help savers not incorporate a healthy dose of advanced technology to help you maximize your savings!
Chip and Plum are two such apps. Both Plum and Chip work through AI algorithms, meaning that they apply complex equations to work out exactly how much to save based on your income and outgoings, as well as your extended goals. To get the ball rolling, you’ll need to fill in a few details, and to let either app know what you’d like to save for, and how much you spend on a regular basis.
You can tweak and maintain the sensitivity of either app by choosing from one of several ‘levels’ of saving. With Chip, you can up the saving sensitivity from levels one to five. Plum, meanwhile, as mentioned, has ‘shy’ to ‘beast’ levels.
You can then take these savings and either deposit them in a savings account or invest it to really compound your savings and grow it over time! If you’re curious to learn more, take a look at my detailed dive in to Chip and Plum to learn more about how automated savings work and how it can help you!
While Plum and Chip are great apps, there are others like Moneybox and Moneyhub that also offer automated saving functionalities.
Set Up a Sinking Fund
Too often, people rely on emergency funds for expenses they do know are coming, but don’t occur very often. Have you ever wondered how to start saving money for a house? Or how to start saving money for a car? Or even how to start saving money for a vacation? That is where a sinking fund comes in.
What Is a Sinking Fund?
A sinking fund is a fund established to save for expected expenses over time. When most people create a budget, they account for monthly expenses like the electric bill, rent or mortgage, and groceries.
But there are other expenses that arise just a few times a year or even every few years, such as school clothes and new computers. Creating a sinking fund allows you to pay for those expenses without tapping into your emergency fund — or worse, pulling money out of investments.
What Categories of Sinking Funds Should You Have?
You should have sinking funds for any expense you expect to arise, within reason. For example, you can’t really predict a global pandemic, right? But you do know that you’ll need to buy Christmas presents for your nieces and nephews.
The number and category of sinking funds you create will vary based on your life, income, and values. Here’s a few examples of sinking fund categories to consider:
- Car repair/replacement: This can act as a place to store more for repairs and maintenance. But it can also be used to build up a fund to replace your current car.
- House repairs: The average roof needs to be replaced every 20 to 25 years and can cost upwards of £10,000. Would you be able to cover that? A sinking fund for house repairs should cover leaks, a new roof, appliances, and general maintenance.
- Gifts: Set aside a few pounds each payday to buy gifts for Christmas, birthdays, and weddings. That way you won’t be stretched thin when the times comes to buy the presents.
- Electronics: You can create separate funds for each piece of equipment. But you may find it easier to have a single fund. Just make sure you are putting enough into it.
- Pet care: Vet bills can add up quickly, especially once your beloved pet gets older. Setting aside a bit of money every month means you are prepared if your pet needs emergency surgery or becomes ill.
- Budget for Treats: Cutting back on money so you can save isn’t always about losing out on the finer things in life. Therefore, you will simply have to start budgeting for certain treats and goodies you’d afford to yourself more regularly.
These are just a few examples of sinking funds. Take the time to look at all your expenses — you might realize that what you considered an emergency was actually an expected expense. If so, create a sinking fund for it.
Adding to Your Sinking Funds
The amount you put in each sinking fund will vary based on your income, location, and the bills you need to prepare for. Plan to save one percent of the value of your home per year for home repairs, then consider how much you spend per year on other expenses and save accordingly.
Consider placing a cap on sinking funds. For example, once your pet fund reaches £2,000, that money might be better served by investing it, where it can potentially earn more than a standard savings account and provide you with greater resources over the long-term.
Earn Interest on Your Savings
Earning money from savings interest is never guaranteed thanks to the fact that these rates really can go up and down at any time. However, a great way to start learning how to save is to make the most of an account with a solid rate of interest. It’s a passive way of making money that’s well worth looking into.
Coming back to Plum Pro, the app and premium service will enable you to make as much money as possible with interest boosters on top. By taking part in the 52-week challenge via the app as explained above, you’ll be able to set up interest pockets for various savings pots and goals. Plum, at the time of writing, offers over a 4.0% AER interest rate for Plum Pro users. It’s worth mentioning that these interest accounts are provided by Investec bank, who do have the right to change the rate at any time.
Getting as much interest back off your savings just makes sense. We may be looking at a period of economic downturn and low rates. However, that really doesn’t mean you should hold off on making the most of interest.
Simple Ideas to Start Saving Money Today
In this guide, I’ve put together some top tips you can use right now to save money on a tight budget. Therefore, if you’re interested in finding the best way to save money quickly, you may well find it nestled amongst the following steps. Read on, and get ready to hold onto those pennies.
Sell, Sell, Sell
There are two types of people in the world. Collectors, and sellers. We all like having nice clothes, books to read and gadgets to play with. But how many of your possessions do you actually use on a daily basis? Are there any collections you’ve amassed which could do better fetching you some extra money online?
Don’t be afraid to sell on some of your bigger collections. On one hand, it can be hard to part with some possessions, and I’m not saying pawn in anything that has sentimental value. However, if you’re looking to save money, and fast, you’re going to need to think about selling off some of your less-used items and stock which is simply collecting dust. Generate some quick cash so you can put it away for saving.
Cut Out Bad Habits
The best way to save money in a short space of time is, of course, to cut back. Think about what you’re spending money on regularly. Are you a smoker? Do you gamble, or go to betting shops? Do you find yourself buying things you don’t necessarily need? It’s time to start cutting back now, in the name of helping yourself and your family later.
Calculate how much you spend on habits such as smoking, betting or drinking alcohol each month. Smoking, in particular, has never been more expensive. Therefore, it will be worth considering trying to quit if you want to save the pennies. By cutting out the worst habits, you could be saving hundreds each month.
Shop Around and Compare
We’ve all seen those price comparison website adverts on TV and online. They’re pretty pervasive. However, they have saved millions of people thousands of pounds. If you’re the sort of person who is keen to set up an energy supplier or insurance plan without shopping around, you may be doing your money a disservice. Therefore, it is worth thinking about comparing a few deals, regardless of what it is you may be looking for.
Looking to save on energy bills? What about travel insurance? Credit cards? Comparison sites such as Quidco will help you see what’s out there beyond the usual channels. What’s more, some will even have money-saving perks and deals should you buy policies and plans through their services. Therefore, it’s one of the best ways to save money fast if you’re running up big bills with the wrong providers.
Be Smart About Food
Plenty of us find that buying food and drink we don’t need is draining our bank account. One of the best ways to save money quickly is to simply make your food travel that little bit further. I’ve compiled 20 ideas for ways to save money on your food shopping which you might find helpful! If you can, plan a weekly shop and personally I like to buy online as I find that generally I’m spending more money, and therefore wasting it, if making regular shopping trips on an empty stomach!
Once again, shop around. Some supermarkets offer money off deals if you buy online with them for the first time. When you’ve got your food delivered, if you can, throw as much as possible into the deep freeze. Bread, milk, vegetables and meat will all last weeks and months longer if you freeze and defrost them at a later date. Don’t be tempted to keep topping up.
Don’t Be Afraid of Coupons
The best way to save money if you like eating out and going for the odd round of drinks is to search for coupons. It is no longer seen as cheap or cheeky to find money off vouchers online. Some of the best resources for this include HotUKDeals, Groupon, Wowcher and MyVoucherCodes. Take a look at them all online and you will likely find plenty of popular high street eateries and bars you regularly visit.
Coupons and money off deals really will make a difference if you want to continue having a social life, but want to save money in the bargain. Don’t ever be worried about printing off a voucher or getting staff at a restaurant to scan a code. Everyone is doing it!
Focus on Energy Efficiency
One of the biggest drains for UK homeowners and renters alike will be energy rates and regular bills. If you are on a tariff which isn’t right for you, for example, you could be paying more than you need to. What’s more, your appliances and light bulbs may be more inefficient than you have been led to believe.
It’s therefore a very good idea to take a close look at those gas and electricity bills. It may be worth upgrading or swapping out white goods such as washing machines or refrigerators if they are a few years old and are draining more of the national grid than you can afford them to. What’s more, be smart about the energy you use. Consider installing a smart meter. Turn lights off when you leave rooms. Don’t leave the TV on constantly. Dry clothes outdoors during warmer seasons. It’s the little things which all add up.
Cancel Subscriptions
The best way to save money regularly is to free up cash you’re frittering away elsewhere. Look at your bank balance and check, month to month, where you are spending the most cash. Could you cut out Sky TV services and find a cheaper alternative? If you’re out of contract, it’s time to cut things down.
Look for non-essential subscription fees which you can do without for a few months, at the very least. Then, set up a standing order for your current account to send the money you’ve saved over to an ISA or similar savings account. By now, you probably won’t notice the money going elsewhere, and what’s more, you’ll be building up a nice little nest egg in the bargain.
Join a Library
The internet has probably helped take the place of the humble local library in plenty of different ways in recent history. However, there are still some great ways you can save money simply by taking advantage of a library card. Many libraries will still let you borrow CDs and DVDs for free, and you can take advantage of free internet access as well as resources such as courses and tutorials.
Why spend extra on services like Netflix and NOW TV when you could be getting tons of great entertainment for free with a library card? You may even cut down on internet costs, too, if you find you don’t go online too often. Certainly think carefully about your local resources and how you can make the most of them.
Cut Down on Travel Costs
The best way to save money fast for commuters is to cut down on the cost of getting from A to B and back to A again. You may be spending a fortune on car repairs, or on train fares and taxis. If this is the case, think about looking for cheap car parts online, join vehicle sharing schemes, and buy season tickets if you use public transport on a regular basis.
At the same time, you’d probably save plenty of money by walking or cycling as much as possible. It’s also a great way to exercise regularly. Furthermore, if there’s a way for you to travel without having to pay exorbitant fees on public transit or in petrol/diesel and repairs, it’s well worth seizing it.
Cut Down Your Mobile Phone Tariff
Many mobile phone networks up their monthly costs if you buy a new handset alongside. Unfortunately, you are more often than not going to be tied into at least a two-year contract. Once you’re out of the woods, however, you can start looking at your usage each month and slice down those fees.
If you’re happy with your current handset, it may be well worth looking to move to a SIM only deal with your current network. In many cases, you will be able to cut your monthly tariff rate in half and still get all the minutes, texts and data you need. Most networks will let you monitor your usage from a dedicated app on your phone, which means you can easily see where your cash is going each month.
Another way you could save money on your mobile phone bill is by utilising the Airtime Rewards app. It’s a specialised cashback app which, rather than paying cashback out as cash or vouchers, connects directly to your mobile phone service provider and any accumulated cashback goes towards paying off you monthly phone bill.
Think About an Overdraft
If you’ve not already made arrangements with your bank for an authorised overdraft, now may well be the time to start making a change. Providing you have a good credit rating and a reliable history with your bank, they will be willing to set you up on an extensive deal. You will have to pay a percentage in fees each month, but it will be better in the eyes of your bank that you set up an overdraft in this way.
If you regularly go into an unplanned overdraft, it’s well worth setting up a safety net for yourself. Therefore, you can concentrate on getting big bills and payments out of the way while trying to save elsewhere. All things considered, an overdraft is one of the safest ways to borrow money if you need it.
Looking for More Ideas?
Are you looking for even more ideas to save money? I’ve got a couple of articles which you may find helpful! Check out the following:
Conclusion
Saving can seem difficult, but if you can make use of these tips and really put your mind to it you can do it. There are plenty of different options opening up for UK savers right now even in the midst of an uncertain economic climate. You just need to get started as soon as possible.
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