Are you craving financial security or saving towards a big goal? Do you spend all day reading finance articles and dreaming of not having to worry about money? In this article, we will break down the basic steps of managing your finances. If you want to know how to save money, read on.
Know What You’re Working With
If you want to save money, the first step is to work out the numbers. Record your income and look back through the last few months of expenses to work out how much you have leftover every month. Write down how much you spend on certain categories. This will help you to identify where you may be overspending.
Doing an analysis will help you to make a realistic budget based on your spending habits. If you have an online shopping problem, you are unlikely to be able to become a minimalist overnight.
Look For Subscription Services You Don’t Use Anymore
Subscription services often offer free trials, banking on the fact that we will forget to cancel them. We can also forget to cancel subscription services long after we have finished using them. Now we have subscription services for most aspects of our lives:
- Dating apps
- Food and beverages
- TV and entertainment
- Pet supplies
- Hygiene supplies
- Business services
- News or finance articles
One of the easiest ways to save money is to cancel subscriptions you no longer need. These might be ones you forgot to cancel or services you can do without until you achieve financial security. Could you perhaps make do without dating apps or cancelling one of your entertainment services? Do you really need to pay for VIP subscriptions to clothing stores or food delivery services?
Make Small Changes
Just like with anything else, going cold turkey will mean you may struggle to maintain the changes you make to your finances. We recommend making small changes and then reviewing your finances after 3 months to make more changes if you wish. By doing this, you build up the habit little by little. Even an extra £200 a month will make a difference when you are trying to save money. Increase it little by little once you can easily maintain it.
The small changes could be as easy as making your lunch 4 days a week instead of buying it every day. It could be limiting the number of drinks you have on a night out. You do not have to cut things you enjoy out completely. Make most of the cuts from places that do not serve your needs and interests.
Set Milestone Goals
Your overall goal may be financial security, but that is a vague concept. There is no way to measure it and no way to know when you’ve achieved it. Instead, break your goal into small milestones that you can work towards. For example, financial security might be broken down milestones like:
- Have an emergency fund of £3,000
- Pay off credit card debt
- Pay off student loan
- Contribute £1,000 per year into a private retirement fund
- Save money for a house deposit
Your financial goals should not just focus on ways to save money; they should also focus on paying down debt, building credit, purchasing assets, and saving for retirement.
If you are not already reading books and articles on finance, then you need to start. Take all financial advice with a grain of salt as it may not be applicable to your situation. Also, be aware that the purpose of some of these finance articles may be to sell a product. Do some research and consult a number of sources to find the best finance articles about:
- How to budget
- How to become debt-free
- How to save for retirement
- How to get the most out of employee benefits
- What is net worth, and why is it important
- How to save money
- How to invest
- How to build multiple streams of income
Look at personal finance basics and for people who are documenting their journey to financial security. Be wary of information sources from other countries as the advice may not apply to your area.
Do Small Challenges
Set small finance challenges for yourself every three months or so to keep it interesting. These are more intense than your usual savings goals but will be for a short period of time, perhaps a week or a month at most. You might decide to take out £50 or £100 in cash at the start of the week and only let yourself spend that cash all week. Of course, fixed expenses like bills and rent are not taken out of this budget. But everything else is groceries, lunches, after-work drinks. Having a visual representation of how much you have left for the week will make you prioritise your spending and help you become more aware of how quickly things add up.
You might do a more intense challenge where you do a “no spend” week or month. These challenges show you how much you already have at your disposal and helps you to come up with creative ways of stretching your resources. You use up the food in your pantry and freezer and dig through your wardrobe to find forgotten pieces. There are a number of financial challenges out there that you can try. Put the money you saved in this week or month straight into your savings.
Get Friends and Family On Board
We often have the best intentions when it comes to our finances, but all it takes is an invite out from friends and family to tempt us. The best way to prevent your goals to save money from coming unravelled is to tell your friends and family that you are trying to cut back on spending. Let them know that you are not going to always say yes like you used to. Ask them to help hold you accountable and to not tell you that your favourite store is having a sale.
That being said, you do not have to become a social pariah to achieve financial security. There are plenty of ways you can spend time with your loved ones without spending too much money.
- Picnics or potlucks
- Street food
- Visit parks
- Visit free museums and galleries
- Movie night at home
- Beach trip
- Go for a drive
- Explore a neighbouring town
Saving money does not mean that you stay home all day sulking. You can still lead an interesting life while doing things that you enjoy. You also do not need to stop spending money; just set yourself a fun money budget and allocate it wisely. If you want to go to a concert, do so, just know that tickets will eat up a large chunk of your fun money for that month.