The economy is tough right now, and it seems like more people than ever before are carrying a lot of debt. The best way to avoid getting into that situation is by saving money each month, but that’s easier said than done!
In fact, according to The Motley Fool, credit card debt in the UK reached £56.5 billion in 2021, and the Covid-19 situation didn’t help in the slightest. With companies resorting to furlough schemes and redundancies, debt is a massive problem.
While the economy and ongoing issues with the pandemic mean that more people are likely to incur debt, there are some fantastic ways to save money and avoid those red letters that we all fear.
In this step by step guide, we’ll teach you 11 different ways that will help you save money and stop yourself from going into debt. Let’s go.
Look at Your Monthly Spending and Create a Budget Sheet
The first step is to look at your monthly spending and subtract any necessary expenses such as your mortgage, rent, bills, transport costs and anything else that wouldn’t be considered a luxury.
Next, you’ll need to include your mobile phone, internet, and any other expenses you have, such as credit cards and loan repayments. Once you know what you’re spending each month, you can compare it to your income.
If your outgoings amount to more than the amount you have coming in this month, then you can look at where you’re spending the most money and create a plan to cut down on your monthly outgoings.
Creating a budget sheet is also a great way to see if you have a problem with spending or you’re in serious debt. For example, if your outgoings for necessary monthly bills and loan repayments exceed your monthly income, you need to contact a debt relief agency.
Use a Proven Budgeting Rule
Money management is a challenge for many people, and it’s so easy to forget how much spending money you have – especially when most people use debit and credit cards.
Luckily, there is a formula that you can use to make sure you budget each month accordingly. It’s known as the 50/30/20 approach, and once you get the hang of it, you’ll easily be able to action it.
As soon as you receive your monthly take-home pay, you should immediately set 50% aside to cover your rent, bills and necessary expenses. Then put 20% aside for your savings, and you’ll have 30% left for leisure.
You can adjust the ratio to suit your income, but it’s best to make sure your monthly expenses are always covered.
Find a Balance Transfer Credit Card
Credit cards are handy ways to buy something in advance and pay the amount later. However, some credit cards have high-interest rates, which means people will pay back a lot more over a more extended period.
Balance transfer credit cards have a low-interest rate, which means you can pay off your debt over time without having to worry about the pressure of it.
However, they’re not suitable for everyone because conditions are usually attached to their use – like paying the debt off in the specified amount of time.
If you’ve had poor credit before, then you might not be eligible for a low-interest credit card, but it’s worth looking at your options. There are plenty of comparison sites, such as Money Saving Expert, that will show you the best deals and let you check your eligibility for each card.
Assess How Much You Spend On Food
Living in the UK means we have a lot of luxuries that we don’t often think about – and one of those is food. Our supermarket shelves are bursting with delicious foods worldwide. If we can’t be bothered to cook, apps such as Deliveroo and Uber Eats will deliver food from our favourite restaurants.
It sounds great, but the reality is, the average household spends a fortune on food each month. A post from The Guardian suggests that the average family of four throws away 11 meals a month.
One of the issues is that people do their weekly grocery shop, then waste money on takeaways (no judgement, we’re all guilty of it!) According to The Sun, the average Brit spends £1200 a year on takeaways.
Then there’s buying lunch out every day, which can mount up over time – especially when you look at the prices of Subway and other popular lunch joints. If you look at how much you spend on lunch alone in one week, it will shock you.
Plan & Prep Meals
If you want to reduce your spending, planning your meals can be helpful. By creating a grocery budget and meal plan and prepping six days worth of food over one day means you’ll be able to eat healthier – and save money! It can take some time to adjust your routine, but you’ll find that you order takeaways less frequently, and you’ll also be able to enjoy a weekly treat from your favourite restaurant without feeling guilty.Shop Wisely at the Grocery Store
One of the best money-saving tips we can offer you is to ditch the branded foods and choose your supermarkets own brand. Not only do you get a better deal in terms of price, but there’s no real difference between your Heinz Beans and Tesco’s Value Beans or generic oven chips and McCain’s. Don’t forget to check for the latest deals online, and look at your online shopping account for coupons you might be eligible for. Ocado has a dedicated section to view your coupons, and apps like Honey automatically find coupons and scan them when you check out your basket.Use Comparison Sites For Significant Savings
Comparison sites are fantastic for saving money on your household bills and insurance policies. In some cases, you might be able to save hundreds on your outgoings and get a great deal. Popular sites include Confused, Compare The Market and Money Saving Expert.
Cut Your Energy Costs
Switching to a cheaper energy supplier can save you up to £300 each year (Ofgem), and it’s usually worth the hassle of switching. You can also look at ways to reduce the amount of energy you use, such as upgrading your windows or insulating your roof. Older boilers are less efficient than newer models, so while there’s an initial investment, upgrading can save you a lot of money in the long term.Look For Better Car Insurance Deals
Car insurance is expensive, so it’s always worth checking other websites for deals before it’s due to auto-renew. Even if you’ve been with the same company for years, a newer insurance firm might have special offers. Also, if you’ve had an accident or lost your no claims bonus, there are specialist insurance companies that provide policies for higher-risk clients, which can save you more money.Look at How Much You Spend on TV
The days of terrestrial TV are long gone, and while Sky and cable TV are still popular, we also have access to a range of streaming services- which all cost money. There’s nothing wrong with subscribing to a streaming service, but the costs can mount up.
For example, if you pay a monthly fee for your TV package and have subscriptions to the big streaming apps such as Netflix, Amazon Video, Apple TV and Disney Plus, you’re going to have a hefty bill.
Some people find it’s best to cancel their digital TV subscription and stick to apps, or you can take advantage of the rolling monthly app payments and cancel them as and when you need to.
Spend a month with your Netflix subscription, watch everything you want, and then cancel and move on to the next app. You can repeat this cycle and save a lot of money each month. Plus, you’ll probably discover some fantastic new shows!
Open a Tax Free Savings Account
Did you know that you’re entitled to a £20,000 tax-free ISA allowance? This means that when you decide to use that money, you won’t have to pay any tax, which is helpful if you’re saving for a house.
The government offers the scheme for cash and investment purposes, so it’s beneficial to look at your options if you haven’t yet opened an ISA. While the interest rates aren’t great, you can still save a substantial amount over time.
Become a Savvy Shopper
Rewind to a couple of decades ago, and you’d have to visit a shop’s physical location to buy clothes, makeup and anything else you wanted. Today, it’s as simple as typing a product into Google and paying instantly.
Yes, shopping is more convenient, but it also means people are more likely to impulse buy. We’re going to let you into a secret.. a little bit of patience can pay off.
Most online shopping platforms want you to check out, so many will send an email offering you a discount if you fill your basket and leave it. It doesn’t always work, but you can get some great deals.
Buy Second Hand
Many great second-hand stores online offer significant savings on everything from electrical items to designer clothing. Apps such as Vinted are perfect to buy second-hand clothes, and it’s much easier than rooting through things at your local charity shop. Platforms such as eBay, Gumtree and Preloved are great alternatives to buying new items, and most shops have refurbished goods which are often a lot cheaper and still work perfectly. It might take some time to find these deals, but it’s always worth it – especially if you get what you want for a fraction of the retail price.What If I’m Already In Debt?
It can be a worrying time if you’re already in debt, but there’s almost always a solution. Next, we’ll look at how to save money each month while reducing your outstanding debts.
Get Rid of Everything You Don’t Need
OK, you need a car to get to work and run errands, but do you need your current vehicle? If you own a relatively new car or from a prominent manufacturer, you can sell that car and find a cheaper model that’s still reliable. While some people don’t want to downgrade their items, it can be the best way to repay your debts and get back on track again. For example, if your mobile phone is due for an upgrade, you can downgrade to a sim only deal, which means you’ll keep your current phone but pay a lower monthly amount. Eliminating unnecessary expenses is the best way to start getting your finances back on track.Stick to Your Budget Sheet
As we mentioned previously, creating a budget might seem like a daunting task, but it’s not that difficult. Once you know how much money you have coming in each month and your essential expenses, it’s more about your motivation. Some people find it’s best to open separate bank accounts and use them to split their monthly income. You can also print out your budget sheet and keep track of how much you have left to spend at the end of each month. Make a point of creating some savings goals and think about what you’d like to achieve. For example, some people might want to retire early, which requires big savings. But having a savings goal means you’re more likely to stick to it because you’ll know that there’s something to look forward to in the future.Find a Debt Relief Solution
If your debts continue to mount and it feels like there’s no way out, it’s time to consider the many relief options available. You could be eligible for a debt relief order or an IVA, depending on your circumstances.
Bankruptcy is also an option, but it should only be your last resort, as it can be challenging to recover from bankruptcy.
Debt Relief Order
A debt relief order is a government-backed solution available to those with debts of less than £30,000 (£20,000 in Northern Ireland). It’s a quick and easy process that can be done online, and it freezes your interest rates and stops any legal action from being taken against you. However, you must be able to prove that you have £75 or less a month disposable income, and all of your debts must be included in the order. You won’t be eligible for a DRO if you’re a homeowner.IVA (Individual Voluntary Arrangement)
An IVA (Individual Voluntary Arrangement) is a formal agreement between you and your creditors that allows you to repay your debts over a period of time. The amount you pay each month is based on what you can afford, and any interest increases are frozen throughout your repayments. The main benefits of an IVA are that your creditors won’t contact you, and homeowners are eligible to apply. However, many people prefer them because IVA’s offer more flexibility regarding the debts you can include, and there’s no maximum amount to how much debt you have. It’s worth mentioning that you should have two separate debts, and the IVA will appear on your credit file. However, once you pay off the outstanding amount, you’ll have the opportunity to rebuild your credit.Start Saving Money Today
Saving money each month doesn’t have to be a headache, but most people will have to make sacrifices. Hopefully, the simple tips in this post give you a good idea of how to save money without compromising on enjoying life.
Small changes can make a significant difference, but if you require some financial advice or a debt relief solution, our team of experts are just a click away. We can provide more details on how you can save extra money and enjoy a secure future.