So how can you save money even when everyday costs keep going up?

All of us would like to try and reduce our monthly bills, and for most of us, it can feel like an impossible task.

Your pay is not growing as fast as inflation: UK inflation has risen to 2.3%

  • So for most of us, it’s a bit of an uphill fight
  • For many of us, at the end of the month, we have very little left or even nothing at all.
  • And that’s a key reason for low savings rates across the UK

This is a sobering thought:

Research carried out by the Money Advice Service shows that four in 10 working-age people have less than £100 saved in total.

What Happens When You Need Money in a Hurry?

We tend to go to the obvious places-

  • Using credit/Credit cards
  • Borrowing from friends and family

It can feel like you have nowhere else to turn to, however, there are ways to save without it hurting too much, simply by changing your spending and saving habits.

The three biggest changes you can make with very little effort

The Charity Step Change Debt Charity claims that:

Half a million households could be prevented from falling into problem debt if they had £1,000 in emergency savings, to cover and protect all households from financial shocks and setbacks.

Make a budget

Your biggest win this year will be to make a budget – knowing what you’ve got coming in and going out each month is key to getting control of your cash.

Draw up a list

Grab a few bank statements – make a list of your essential outgoings; these will mostly be bills you have to pay.

Next write down your entire regular spending that isn’t a bill but is important to you (like gym memberships, savings or music subscriptions).

Everything else should be money you’re spending on fun.

Get a reality check
  • Get a reality check – compare your outgoings to the money you have coming in.
  • If you’re spending more than you’re earning then you have a problem.
  • The good thing is once you’ve worked this out you can do something about it.
Check your bills
  • Give yourself a pay rise: You don’t have to rely on your boss to give you extra cash.
  • You can make yourself wealthier with a few clever tricks – and you can do it in less than an hour.
  • Check everything you have on this list to see if you can switch to a better deal that costs you less.
Gas and electricity

If you’re on a variable rate tariff you could save a couple of hundreds of pounds a year by locking into a fixed cheap rate.

Transfer cash on payday

There’s a reason the first Saturday after payday is referred to as “Millionaire’s weekend” – we often spend money more freely at the start of the month.

If you set up a direct debit so that an affordable amount leaves your current accounts as soon as you are paid then you are more likely to save than if you wait until the end and see what is left.

Try a small at first, say, £50 a month would mean a £600 saved after just a year, which would be a good start towards a rainy day fund.

Mortgage

If you’re on your lender’s variable rate it’s definitely worth looking at switching to a cheaper, long term fixed rate. Speak to a broker if you’re not sure. This could save you thousands a year and mean you own your home outright sooner.

Credit cards

If you’re paying interest then a balance transfer could save you £1000s a year and mean you pay it off faster. You can check your chance of getting accepted for most cards before you apply.

Overdrafts

These can be a really expensive way to borrow so if you often find yourself dipping into your overdraft, or spend most of your time there, look at getting a money transfer to pay your way out of it. You can shift the money you owe on your overdraft to a credit card and pay it off in regular instalments interest-free. Just be careful not to go back to bad habits and promise yourself your account balance stays above zero.

Life insurance

Not something most people think of switching regularly but it’s worth checking because costs have come down.

Broadband, landline and TV

You could be paying way over the odds for this as prices have been heading skyward this year. Check what you’re using and which channels you’re watching and see if you could get the same deal elsewhere. Think outside the box, for instance Now TV can be a good replacement for Sky. If you want to stick with the same company, call them up and haggle. Telling them you plan to leave can be a great way to drive down the cost, especially if you stick to your guns.

Mobile phone

If you own your handset or aren’t tied into a fixed contract look at switching to a SIM only deal, these can be less than half the cost.

Water

If you’re not on a meter but have fewer people living in your house than bedrooms you could save money with a water meter. You can do a check online and get 12 months’ to change back if it costs you more

Reclaim

It’s worth checking whether you were mis-sold PPI or hit with unfair bank charges in the past or if you’re entitled to compensation for delayed flights or trains. You can check this easily so don’t pay a company to do it for you. You might get nothing but you could be owed £100s back.

Technology: Meet Squirrel 

Groceries

Not something you’d naturally think of switching but it’s worth comparing the cost of your regular shop at each of the major supermarkets near you because it could help you cut the cost. Mysupermarket.com gives you an easy way to do this and it helps you port your online basket over to your cheapest supermarket too.

Insurance

If you’ve stuck with the same company for years it’s likely they’re quite literally taking you for a ride. Loyal customers never get the best premiums so shop around. Even if you want to stay where you are it’s worth checking what you could pay for equivalent cover elsewhere and then use this to haggle your existing company down

Check your credit report

Check over your credit report – this is what lenders use to help decide whether you’re worth lending to so it’s in your interest to make sure it’s in order.

You can check it for free on Google or sign up for a 30 day free trial with Equifax or Experian. Make sure all of the info it holds about you is correct if you notice anything odd get it sorted as a priority.

Take your ‘fun’ money seriously

Get serious with your fun money: Whether your weakness is taking out coffee, shop bought lunch or a cheeky pint the cost of small spends can really add up.

Think about where all of your fun money is going and see if you can make small swaps that add up to big savings.

Use Technology

We rely on technology for most things in our life’s today, the list is so big I could not fit it on this page.

So why not use an app to help you save money?

And it’s coming.

Chip claims to be the UK’s first automatic savings app.

It analyses your spending and works out what you can afford to save based on that, automatically moving between £5 and £25 into Barclay’s savings account every few days.

Savings can be instantly withdrawn, so you never risk being left without cash.

An alternative to Chip is:

Plum is a “little savings butler” that works in a similar way, monitoring spending and automatically setting an affordable amount of money aside each week.

You can communicate with it and get an update on your situation using Facebook Messenger.

Generate a new income

If saving money really is too hard on your current budget then it could be worth looking at a new income stream and then having the money you earn paid directly into a separate account.

That doesn’t necessarily mean adding an evening job to your busy day, however. There are several ways to make some extra cash that does not involve working 16-hour days.

For example:

Under the Rent A Room Scheme it’s possible to lease out a spare, furnished bedroom for up to £7,500 a year without paying any tax on the money. Yes, there will be expenses that go alongside that, including increased wear and tear on your home, but if you transfer any profits into a savings account then you could have a nest egg saved within months.

Related Article: Here’s how much the average US family has saved for retirement

And renting a room is not the only option. It’s possible to rent out loft space, parking spaces and even garden space in today’s sharing economy. Even a small amount of profit will soon add up, particularly because the first £1,000 you earn this way will be tax-free from this April.