Why to save money
Have you ever been put in a situation where you needed money to pay for something, but the funds were unavailable? Maybe you lost your job and didn’t have money to pay your bills. Perhaps you’ve got car troubles. Many people nowadays have extraordinarily little money saved; as a result, they tend to borrow money to pay for things that are in fact inexpensive. This post will show you how to save money and hopefully illustrate the importance of it.
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How to save money
Saving money doesn’t need to be difficult, in fact, it is quite easy! Once you get started, it becomes addictive! Now I want to save as much as I can, I have a plan for that money. I just need to accumulate it faster.
Unfortunately, the more money you earn doesn’t necessarily make it easier to save. People who earn more money, tend to spend it faster. A prime example would be celebrities and lotto winners. Try not to get dragged down owning things that will eventually own you. This point is illustrated nicely in the book: ‘The Millionaire Next Door’.
1. Spend less on going out
Are you one of those people that likes to buy a Starbucks coffee on the way to work? Or perhaps you don’t make lunch for the day and buy a meal deal on the way to work. Maybe you even get a cheeky MacDonald’s or Subway for lunch on Fridays. You may even be all of the above. Not buying that Starbucks or meal deal could be saving you £3 a day, £15 a week, £60 a month, £720 a year!
That is a fantastic amount of money for coffee! You don’t even have to remove it completely, if you only bought it twice a week, that would be £288 a year. That’s a saving of £432! Couple that with going out less for meals or buying drinks at the pub.
You could save a lot of money by having people over. Order in some pizza and buy some beers at the shop and you’ll likely save a lot more than a night out.
That potential £60 a month saving could definitely be put to good use in your Vanguard account. Watch your money make more money! You’ll be laughing while making money in your sleep!
2. Decrease your direct debits
We often don’t check our direct debits; I have shown a bunch of people how to save money this way. Every year, companies put their direct debits up. Be vigilant and make sure you’re checking your bank statements regularly. You need to know how much is going in and out of your account. Don’t give away money because you’re too lazy to check!
The best deals go to new customers! So make sure you are using comparison sites to get the best deals! They often give freebies for shopping with them i.e. 2-4-1 on meals and cinema!
Do you really need that phone? Does your current one not work? Are the upgrades really worth the additional money every month? More often than not, they’re not! Why not keep your old handset and move to a cheaper ‘sim-only’ plan? I only pay £13 a month and my phone still works really well! The battery could do with upgrading, but that’s much cheaper than buying a new phone. From £50 a month to £13 would be a saving of £37 a month! Damn that money looks good in your account! Can you see it growing?
3. Sell unwanted things and increase your income
‘The Life-Changing Magic of Tidying’ what a book! This encouraged Filipa to get rid of a bunch of clothes and items that didn’t bring her happiness. Selling doesn’t have to be hard, this could be on eBay, Amazon or even a car boot sale. You don’t have to make a ton of money, but to clear up a lot of space and make some money is fantastic!
You could also look at different ways to make a little extra cash. Why not create an online business? My sister-in-law has a company that sells these awesome t-shirts ‘Beautifully mixed’. I even have a couple of students that either created a Shopify store during the lockdown or used their hobbies to make money. Why not consider a side hustle to increase that income? Then make sure you put all of that additional money aside! I mean we are looking at how to save; not to make more money to spend.
4. Pay for things in full, not monthly
Look carefully at the fine print. Are they charging you for the pleasure of spreading out the cost for the whole year? There are however, occasions when this would be acceptable, but there are many more when it wouldn’t be.
I would happily spread the payment of my house out over a period of time and pay extra for this pleasure. However, this will wind up costing you more money in the long run, and when I say more money, I mean hundreds of thousands! So, pay off your mortgage as fast as you can, we can show you some methods.
Don’t pay extra for the pleasure of having items now! You don’t need a new Macbook that badly. Or that watch or clothes! You don’t even need to pay your car insurance monthly. Put aside a little money every month for the amount that your insurance will be. When it arrives, you will have enough to pay it off without paying them any interest! Be money savvy and hold onto as much of yours as you can. You likely work too hard to just give it away ‘willy nilly’.
5. Think carefully about your mode of transport
You don’t need that fancy car!
Don’t get bogged down with wanting a brand-new car and paying £300 a month for it for the next three years for the pleasure (not forgetting you needed to put the additional £1,000 down that potentially came from a credit card). That’s £11,800 in three years! If you leased that car you’ll end up giving it back and then having to repeat the process again for the next three years; that’s £22,600 in 6 years! If that money went into an index fund with an 8% rate of return, your money would be worth around £30,000! Instead, you have 0 to show for it. Why not read this article to see the pros and cons of leasing a car.
Although, you would still need a mode of transportation. My saving savvy father-in-law bought a 3-year-old Yaris with 10,000 miles on the clock for around £7,000 cash. It is now 10 years old and has had no problems! If you made this choice, you would have saved £15,600 in 6 years. In the same index fund that would be around £25,000.
The problem we have is that due to people not saving, options like this are not available to them. Make sure you’re making sensible choices and you will be able to make savings like this! Think, £720 a year saved from making coffee before you leave the house instead of buying it!
6. Do you really need to live there?
Rent is expensive, especially in London. Renting in Central London is insane! Renting close to Central London is still insane! Hell, rent near me for a room is £700 a month! FOR A ROOM! How to save money… ‘do you really need to live there?’
Consider living further out, the savings will be tremendous. Why not even consider leaving London, loads of people are these days? You can rent a room in places in England for around £200 a month and a whole house for £500.
The stress of London can be overwhelming and the work-life balance is shocking. Couple this with the extortionate rent and you have yourself a whole host of stress-related illnesses.
Another viable option would be to move back in with parents. For many people, this option would be the end of the world. But for many others, this would mean rent-free living! Free food and board with washing included! Some parents will want a contribution, but it is usually not very much. If it is more than rent… They don’t want you back! Take the hint.
This point will save a chunk each month, it would be hard to put a figure because of the variables. Perhaps a saving of around £200-£400.
7. Don't care what others think
We are often so caught up with what others think of us. We want that Instagram lifestyle! That will not teach you how to save money though, only haemorrhage it. Don’t waste your time on the perception of wealth. Do you really want to spend a fortune on making everyone think you are wealthy when you could be putting in your time and effort into actually building wealth?
This one is really simple, and I can’t really put a saving amount on it. If you can’t afford it, you shouldn’t really buy it. Credit cards don’t mean you can afford it – they are ‘fool’s gold’ (although not literally).
8. Get a cheap hobby that takes up your time!
I like video games. I especially like ones that take ages to complete. This means I can spend hours, even weeks playing the same one. For £40 I can save three times that amount by staying home and playing.
If the game is anything like ‘The Witcher’, I will have completed it three times! This is great, although I would really recommend a hobby that will challenge you and allow you to learn a new skill.
Choose a hobby that is cheap and gives you the ability to create something at the end. I taught a year 8 today who said she’d been making little pieces of Jewellery during the lockdown and selling them. She created a little online store and had sold 2 items. She was very happy knowing that her hobby can generate any income at all.
If you manage to do this with digital products, it would mean that you could sell the same product over and over again without having to remake it!
I like to spend a lot of my free time now learning new skills that I can put to work. One of these skills is blogging. A hobby that has the ability to also produce an income. I have also been enhancing my programming skills to create an app. Why not try this yourself, you’ll end up saving a ton of money, you may even end up making some while you’re at it.
Saving money doesn’t need to be difficult, following the above 8 tips will really help you on your way. You never know, you may fall in love with it and try to horde that gold like a dragon! Remember, the more money you keep hold of, the better a wealth-building tool it will be.
Once you can see the benefits and find different ways to save in your life, why not start saving for a house? Or even your child’s future? These different methods will give you an understanding of how to use that money for the better.
Good luck on your saving journey. Once you manage to decrease your outgoings – why not try to put aside a minimum of 10% of your annual take-home pay every month. Once you do this, you’ll start to see all the possibilities unveil themselves.