If you had a financial emergency come up would you be able to survive that emergency? Or would you be dipping into your credit card limits or even be forced to take out more debt just to cope?
Research done by HSBC a couple of years ago highlighted that a third of UK adults are not prepared for a financial emergency. Many of them admitting that they would not last a week should their income suddenly stop due to little or no savings to fall back on. This has only been made worse during the pandemic.
Many people have no idea how much they're spending each month let alone setting aside some of that money into savings to deal with such emergencies.
If you're looking to start saving more money so that you've got something to fall back on should you have a rainy day, then these simple tips will help you. It's important to note that none of these strategies are groundbreaking, in fact, most of them are simple tweaks you can make to your lifestyle to save more and spend less.
Generally, when it comes to personal finances I always opt for simplicity.
Now it's safe to say I am not a financial advisor so take this advise with a pinch of salt and test out any strategies for yourself first, these are just some of the things I have done to save money in the past.
1. Prioritise
Before you start saving any money the first thing is to identify your priorities. It's always helpful to look at what your aims are because when you know where you're headed, you can plan out a clear path to follow. For this reason, you need to highlight your priorities when it comes to your finances.
Ask yourself some simple questions, such as:
- What are my major priorities when it comes to saving money e.g. do you have a certain amount in mind, or would you like to save on a daily basis instead of a weekly or monthly basis?
- What am you looking to save money for e.g. are you wanting to save for a house, or would you like to pay more into your pension or even save more to travel? You might want to save more money to pay off a crippling debt, or even save money for your children's university fees?
Whatever the case once you identify your "Why" and the reasons behind your saving goals you can move forward with much more clarity.
In his popular TED talk Simon Sinek talks about the power of finding your why which can be applied to every change you try to make to your life including saving more money. In his book Start With Why he says that:
"Our WHY is our purpose, cause or belief—the driving force behind everything we do" - Simon Sinek
So work out your why and prioritise your savings so that you're taking positive steps towards achieving it.
2. Budget For Savings
At first this may sound like a crazy idea, but when was the last time you looked at your personal finances and actually put down "savings" as an expense? Probably never right?
We focus so much on writing down all the bills, expenses and everything else we have to pay to "other people" yet never set savings as an obligation. It gets put down as a "nice to have" rather than something that has to be done no matter what.
As soon as you put savings into your budget you start to make a conscious effort to set aside money for savings as early as possible in the month, until it becomes an unconscious process.
The reality is that if you set a dedicated portion of your income and transfer it to a separate savings account at the start of the month it's more likely to get saved than if you put that money in to your bank account and wait until the ned to see whats left.
Add savings to your budget and then stick to a set amount going out each month, see it as a BILL that needs to be paid, not to someone else but to your future self.
3. Set A Deadline
This could be in terms of weeks, months or years and largely depends on the priorities you outlined for yourself. Having a clear goal, and a specific date to back that goal allows you to put systems into place to allow you to follow through and actually achieve your money saving goals.
When we have clarity on the date we want to achieve something by and we know what we are saving for, this can act as fuel and motivation which can help inspire us to take action. It also adds a sense of urgency because we have a specific deadline to achieve our savings goals, so we're less likely to procrastinate.
So whatever you are saving for, pick a specific date that you hope to have enough money saved by, and then put those dates and goals where you can see them daily. This will not only help motivate you, but also acts as a constant reminder of your why.
Make sure you are realistic with your timescales as the last thing you want is picking something that is not achievable, as this way you are setting yourself up for failure even before you begin.
4. Right Tools
Nowadays it's a lot easier to save more money as we have so much help in the form of apps and softwares, these can make the process of saving money less boring. If you're anything like me then you most likely don't sit around number crunching all day long and the mere thought of a financial spreadsheet probably sends shivers down your spine. Thats where these tools can come in handy.
There are thousands of apps, softwares and tools online so I'm not going to go into specific ones, however most of them provide the following benefits which you might find useful:
- They can show you a breakdown of your spending into different categories so you can see where you're spending most of your money (the more clarity you have on your spending habits the more areas you can optimise).
- Some apps can determine how much things cost in your local area and in your budget so you can monitor for price changes in the real world.
- Some apps allows you to make a shopping list, this can help you save money when you buy groceries as you're not buying useless things you don't need.
- There are also apps and websites that help you compare non negotiable expenses such as utility bills, internet and mobile providers, insurances and much more.
- Some apps allow you to automatically invest your spare change from purchases into predetermined funds and stocks and other investments.
Overall the aim is to use these tools to help you make saving more money a breeze. Any tool that makes the process more complicated and harder than it needs to be should be avoided.
5. Automate
This is such a simple tweak you can make to your personal finances and is probably one of the easiest of these money saving tips once you have it up and running. Automating your savings can allow you to setup systems that will run regardless of how you're feeling on any given day.
Making the saving process unconscious and something that runs on autopilot allows you to divert your brain power to other things, it also removes a lot of the emotional burden that comes with finances.
The process I use to automate my savings is based on T Harv Eker's JARS Money Management System described in his book, but instead of using jars, I use bank accounts.
The way it works is that any income you receive for example your salary, rental income, dividends, side hustles etc all of this is divided automatically (by setting up standing orders) between 6 different accounts.
There are different proportions for each category which I go into in more detail in this post, but long term savings account for 10% of that money. This 10% automatically comes off the income before I even see it and goes into its specific account.
This way I don't forget to transfer money into my savings accounts, it is done on autopilot for me.
It also means that you are not waiting till the end of the month to transfer money into your savings when there is more chance that there is nothing left.
6. Track Expenses
Tracking where your money is being spent and how much is a great start to figuring out where you may be able to save more money. This process involves looking through all your financial statements including bank account statements, credit card statements, loan statements and anything else that shows your spending. This will allow you to get a birds eye view of all your incomings and outgoings.
Just doing this process will give you way more clarity on your finances and can help you make informed decisions.
If you like you can even use certain apps and tools for this process. As mentioned before many apps nowadays allow you to categorise each transaction in to different categories and create visual charts and graphs from the data.
What you monitor gets managed so you need to monitor for a month or 2 what you're spending money on because only then will you know where you need to focus to save more money. You can't manage what you don't know.
Above all the biggest benefit you get from tracking your expenses in my opinion is financial control. Most of us believe that we have no control over our money, so tracking your expenses can give you a sense of control and the confidence to know exactly where you need to make changes.
7. Cut Spending
This involves identifying areas where expenses can be reduced or even eliminated completely. Make sure you are ruthless in this process.
Look through your monthly statements to find unnecessary monthly expenses or direct debits that can be streamlined. Often we sign up for apps, softwares, subscriptions, on demand services and other monthly expenses but hardly use them enough to justify the costs. Take a long hard look at your monthly subscriptions and ask yourself whether you really need that particular service or can it be eliminated and the money saved instead.
If it is as service that is essential then go onto comparison websites or call your provider and see if you can negotiate cheaper contracts to reduce your monthly payments. Once you have done this at least you can rest assured that you are not paying a premium for it, and any discounts can be diverted to your savings account.
8. Think Long Term
Time is your biggest ally when it comes to saving and investing so use it to your advantage. For bigger savings goals such as for retirement or your child's tuition fee's the sooner you can start saving and investing the better.
Work out a set amount to save each month, then create a system of automation to allow you to do so. The key is to create a habit of saving regardless the amount. Start small and increase the amount slowly to suit your budget.
The small incremental deposits will increase and compound over time, and edge you closer towards your savings goals.