Lockdown has turned us into a nation of savers. People in the UK usually save around £4 billion a month, but New Model Adviser reports that, during the spring, this figure rose to an impressive £25 billion.
Of course, it was easier to save when lockdown reduced your ability to spend. Staying inside and working from home meant fewer travel costs, and no opportunities to enjoy a pub lunch or take the family out for a weekend treat.
The urge to create financial security during lockdown could also have been a factor in this sudden savings boom. In fact, saving money can make you feel better even outside of a global crisis. A study by Lloyds Bank showed that 74% of people who consistently contribute to their savings feel happy, opposed to only 36% of those who do not have savings.
This shows that having a financial safety net to fall back on could improve your overall quality of life. So, follow these ten tips to boost your savings.
1. Understand your budget
Budgeting is an effective way to control your finances and build up your savings. So, find a budgeting process that helps you keep on top of your financial commitments, maintain a consistent amount of disposable income, and identify areas where you could cut back and save money.
If you don’t know where to start, try following the popular 50/30/20 rule. This guideline divides your net income into three categories. Try spending 50% of your salary on your needs, such as bills and groceries, 30% on things you want to make your life more enjoyable, and put 20% into your savings accounts and investments.
If you find yourself spending more than the allocated percentage of your income on any given category, it might be time to cut back on your expenses in that area.
2. Save before you spend
If budgeting guidelines such as the 50/30/20 rule don’t work for you, there are many other ways you could budget. The most effective methods tend to prioritise saving over spending.
Don’t spend first and then save what you have left at the end of the month. Instead, try saving first. This can help you save consistently. Think about it as paying your future self – you’ll have a growing safety net to fall back on later, while still having some disposable income now.
3. Avoid instant gratification
Spending money can feel good. But do you really need all the things you buy? You can limit your spending to things you actually need and treats you genuinely want if you hold off a moment before each purchase.
For bigger expenditures, such as a new car, try using the 30-day rule. If you only make purchases you still want 30 days later, you’re less likely to spend money on things that don’t add real value to your life. For less expensive purchases, follow the same method on a shorter, 24-hour timescale.
4. Review your bills
Reviewing your bills can reveal ways you could cut down regular expenses. For example, paying bills quarterly or annually rather than monthly can generate a discount.
You can also check if other providers have lower tariffs for your utility bills. According to the Telegraph, more than 400,000 people changed from the largest six energy suppliers to smaller companies in June and July 2020. You could save around £330 a year by following suit.
5. Apply for the Green Homes Grant
You can also save money on your energy bills by applying online for a Green Homes Grant. Through the scheme, you could receive vouchers for home renovations to improve the energy efficiency of your home.
These vouchers will cover at least two-thirds of the cost of the improvements, such as installing better insulation. The government estimates that you could save up to £300 a year in bills thanks to these modifications.
6. Review your direct debits
According to This Is Money, people in the UK spend an average of £39 a month on recurring payments for services they don’t use anymore. Going through your direct debits can help you cut back on this kind of unnecessary spending.
Review your bank statements to see what direct debits you have set up but no longer need. If you’re paying for gym memberships you don’t use, multiple streaming services, or insurance on products you don’t own anymore, cancel the payments to turn your expenses into savings.
7. Plan with your partner
Reviewing your finances with your partner can help you establish a financially secure future and help you save money.
You could save money by making the most of your combined tax allowances. For example, you could use your Marriage Allowance to transfer up to £1,250 of a lower earner’s unused Personal Allowance to the higher earner and potentially reduce your overall Income Tax bill by £250.
8. Take advantage of employee benefits
Your employer may offer benefits that could help you save money. For example, if you’re eligible for a company car it could be more tax-efficient for you to take a cash equivalent in pay instead.
The government Tax-Free Childcare Scheme could also help you save on childcare costs if you earn less than £100,000 and have a child under 11. Participating in this scheme lets you claim back 25% of your childcare costs, up to a limit of £500 every three months. You can also speak to your employer about starting a salary sacrifice childcare scheme.
9. Pay debts before saving
If you have a choice between paying debt and saving money, paying your debt is usually the most cost-effective option. The interest you earn on your savings is likely to be much less than the interest you pay on your debts, so it makes financial sense to clear debt first.
The sooner you have paid off your debt the more you will have saved in interest. You can maximise these savings by paying off the debt with the highest interest rate first.
10. Shop around for better interest rates for your savings accounts
You can improve the growth of your savings by finding products with better interest rates than your current accounts.
Many High Street instant access accounts pay interest of 0.1% or less, which amounts to only £10 on a £10,000 saving. If you moved that money to the National Savings & Investments Direct Saver that pays 1%, for example, you’d earn £100 a year – a £90 boost to your savings. Shop around for products that offer more than your current ones to make the most of your savings.
Get in touch
The best ways for you to cut down on costs and save more depend largely on your financial situation. To get help evaluating where your money goes and find the most efficient ways to save and invest, contact us today.
Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Please note that the information provided in this article was correct at the time of publishing.