Money worries are one of the most common causes of stress among adults. The pandemic has caused many of us to think about tightening our belts. In this guide, we’ll explore some simple ways you can cut costs and become a savvy saver.
Creating a household budget
The first step to take when embarking upon a savings drive is to create a household budget. Before you start, take a few minutes to go through recent statements and analyze your transactions.
Many of us find it difficult to keep track of spending and we end up making payments that we might not even be aware of. If you have a gym membership you never use or you signed up for a freebie from a subscription service, for example, now is the time to cut out unnecessary expenses and cancel services that you don’t want or need.
When you have your statements in front of you, start drawing up your budget. Use three columns to note down your income, your regular outgoings and one-off expenses that you need to pay that particular month.
Remember to include everything in your budget and to be as accurate as possible. Where you use estimates, round up rather than down. Once you have all the figures in front of you, you can calculate the difference between your income and your outgoings.
Use your budget to determine whether you can save money or pay off debts and to set spending limits. Take a closer look at where your money is going each month and try to make savings. If you’re shocked by the amount you’re spending on takeouts or eating out, for example, set yourself a budget for the next month. If you’re spending too much at the grocery store, establish a new limit and keep track of the total as you navigate the aisles.
We all know that life can be unpredictable so it’s beneficial to update your budget throughout the month, adjusting figures and adding any unexpected windfalls or expenses.
Keeping track of spending
We live in a world where we can buy things without using a card or taking coins or notes out of a wallet, and many of us have multiple direct debit payments set up. It can be hard to keep track of where your money goes when you shop online, you pay bills automatically without seeing statements or writing cheques and you tap a card or a smartphone to make a payment in a matter of seconds.
If you tend to lose sight of where you are financially, it’s an excellent idea to take advantage of online banking. Check your balance daily, take a look at recent transactions and use apps to monitor spending. If you use credit cards, it is particularly beneficial to check your balances frequently and to make sure you make regular payments.
Paying off debts can eat into your monthly income, particularly if you use credit cards or you are paying off a high-interest loan. If you are trying to reduce your debt, try to manage your money so that you can lower interest payments and avoid charges and penalties. Look for opportunities to save by transferring to 0% credit cards, try to avoid putting anything on cards unless you absolutely have to or you can pay it off swiftly, and consider all your options before borrowing money.
If you can pay off debts quickly, you’ll reduce your total debt as well as lowering the risk of incurring additional interest charges. Many people are in debt, which is under control and they are able to keep up with loan and mortgage payments.
The trouble begins when you have problems covering payments or you start to add to your debt without being able to pay off existing debts. If you find yourself in this situation or you’re worried about money, there is help available. You can contact charities that offer advice for free and there are also resources online.
One of the quickest, easiest ways to lower household bills is to compare prices. Thanks to the Internet, it is now possible to compare offers and deals on everything from clothes and electrical appliances to insurance and cell phone contracts in a matter of seconds. You can use search engines and comparison sites to save.
Before you place orders for products, renew policies or choose an energy provider, enter your details or the name of a product and look through the results. You might be surprised at how much you could save simply by choosing one retailer over another or switching to a different insurance or energy company.
One important consideration to bear in mind when you are trying to save is contract length. Consumer champion Anna Richardson advises against taking out long contracts that tie you into a plan. If you have an insurance policy or a phone contract that runs for at least a year, you could be missing out on better deals on short-term, flexible contracts, and there is a risk of losing out when you renew automatically.
If you have a car insurance policy that is due for renewal, avoid taking the easy option and rolling your contract over. Instead, use the Internet to search for offers. Many insurance providers will save their best deals and incentives for new customers and it doesn’t always pay to be loyal. If you find cheaper car insurance for the same level of cover and you are happy with the service your provider offers, contact them and see if they will match competitor prices.
Looking for tailored offers
Most homeowners spend a substantial amount of their monthly income on gas, electricity and water. If your utility bills are too high, it may be possible to save by switching to a different tariff and looking for tailored offers.
If you are on a default or standard charge, contact utility companies and make sure you are on the right tariff. There are several factors that can impact the suitability of a tariff, including the number of people in your household, your average energy consumption and when you tend to use gas and electricity.
Reducing energy consumption
Another way to lower energy bills is reducing energy consumption. Many of us are guilty of using more electricity or gas than we need to. We leave the lights on when we leave the room and we go to bed without checking that all our appliances are switched off at the socket. If these scenarios sound familiar, start making a concerted effort to lower energy usage.
Try to avoid leaving appliances on standby, maximize natural light and swap traditional bulbs for energy-efficient LED lights. Take short showers, save water by turning the taps off when you clean your teeth and wash the dishes, and collect rainwater in your garden. You can use rainwater to water your plants and clean your car.
If you don’t already have a smart meter at home, it’s a great idea to get one. Smart meters track energy usage and expenditure in real-time. With your smart meter, you can reduce consumption and control spending to avoid unexpected bills.
Changing where you shop
We all have days when we need to call at a store because we’ve forgotten something or we fancy something specific to eat but convenience often comes at a price. Try to think about where you shop and look for ways to reduce spending.
Going to fruit and vegetable stalls and markets, for example, can often be cheaper than visiting a supermarket but most of us are set in our ways and we go to the same places every week. Explore local businesses, compare prices and plan a menu in advance.
Cutting down on non-essentials
There is absolutely nothing wrong with treating yourself but often, we spend more on non-essentials than we think. If you have a takeaway coffee every morning or you buy lunch from a deli or a cafe every day, you could save a fortune by making a drink at home or at the office and preparing your own lunch.
Cooking at home, creating packed lunches, taking a flask with you and cutting down on takeouts, dining out, buying clothes and beauty products and organizing days and nights out can all boost your balance significantly. Use your budget to set a limit for luxuries each month. This will enable you to balance saving with reaping the rewards of your hard work. If you know how much you have to spend, you can choose how to treat yourself without feeling guilty.
Many of us are looking to tighten our belts. It has been a challenging year and for many, it is more difficult to balance the books. The good news is that there are several ways to lower household costs, save money and trim expenses without overhauling your lifestyle or cutting out every single luxury.
Start budgeting now, analyze where your money goes, keep track of spending and always shop around for the best offers and deals. Avoid long contracts, search for tailored offers and think carefully about where you shop and what you buy. Manage debts and seek advice if you’re struggling or you’re unsure which debts to try and pay off first.