“I never quite knew how much everything would cost. It seems like all of a sudden you’re living the adult life, paying for bills, the roof over your head, and you haven’t had a briefing of how much that’s going to take from your payslip”.
The ‘cost of living’ seems to be a topic on most people’s lips, especially at this time of year. With increasing bills, and the prices in shops apparently on the rise, it’s no wonder there are claims that all household spending is on the up. Two million UK workers on minimum wages received a pay rise this year*, but is it enough to take on the increasing consumer market? Are more people finding it tricky to make ends meet?
Bills are the dark side of growing up. Think of it as pocket money in reverse. They come flooding in, eventually they turn red, and you’ll be expected to keep track of them all. Taking control of your spending and saving could help reduce the pressure, allowing you to enjoy some of the days in the run up to payday, rather than just counting them. It can be surprisingly simple to reduce your spending, purely by adjusting some lifestyle choices. Over a period of time, these small savings could add up to enough to make an emergency fund for any urgent life decisions you find yourself facing as time moves on.
1) Can you work out what you spend?
Working out where your money goes each month can help establish a grip on your regular outgoings. Going through bank statements can help you separate these out into categories such as:
- TV & Internet
- Eating out
- Leisure Activities
You may also have one-off costs such as holidays or insurance that come out every year. From this breakdown, you may be able to establish what is essential in your spending, and what you could live without.
2) Have you set yourself a budget? What percentage of your spending is essential? Can you work out how much you should be saving a month from what’s left over? Read our Rule of Thirds blog to learn more about division in your payslip. Whatever you have left once you have worked this out could be what you spend on the ‘luxuries’ of life.
3) What can you reduce spending on?
Look at your list of non-essential spending and think about what you could live without. For instance, instead of a gym membership you could try cycling to work. Maybe try considering any subscriptions to TV services you may have. Are you paying a premium for sports channels you don’t watch? You might be able to find an alternative deal.
4) Can you save on the essentials?Spending on essentials is unavoidable, but you can still make it more efficient. It may be helpful to consider some of the following:
- Switch to the utility providers that offer you the best deal
- Shop at the cheapest local supermarket
- Buy own-brand products instead of branded ones
- Follow the deals (e.g. half-price, buy one get one free) especially on non-perishables that you can stock up on
- Create a weekly meal plan to reduce waste
- Resist impulse purchases
- Collect loyalty points (if your supermarket offers them) to get discounts and vouchers
Even if you can reduce your weekly shop by just £10, that’s an extra £500 or more saved up in a year.
5) Where can you make some extra money?
There are many ways you can scrape together extra funds without taking on another job. The idea isn’t to make a huge amount of extra money, just to create a small surplus so you can regularly put away savings. Finding a savings account with a high interest rate could help you beat inflation. For longer-term savings, it could help to consider more adventurous investments such as a stocks & shares ISA.
6) How much can I save?
This depends on your income and spending, and how much you can improve your spending habits to be more efficient. If you can find more, you could soon build up a comfortable emergency fund. Why not get started now?