The £1000 savings challenge is all about trying to help you put away some money every day so that by the end of the year you’ve got more money than you started with. However, it is also about helping you do this in such a way that you don’t have to make drastic changes to your lifestyle or feel as though you are going without. It should help you make alterations that you barely notice or bigger changes that are actually more enjoyable and rewarding.
There are three types of alteration and change you can make with your finances from day one and they can be summed up with the rather satisfying moniker ‘Cut. Cancel. Clear.’
Whether saving up £1000 in a year seems really tough or a piece of cake for you, the first thing that has to be done before embarking on this type of endeavour is to take stock of where you are. Understanding what your current financial situation will give you a much better sense of how hard it is going to be because the path forwards always has to start with the first step. So grab your most recent statements or open your banking app and let’s take a look under the hood.
Be Your Own Personal Financial Adviser
The first step is to review about three to six months’ worth of your recent bank statements from all accounts that you use on a regular basis. Try to collate spending together into groups such as ‘utility bills’ and ‘food shopping’ and ‘socialising’. This last category might be a little lower than usual given all the Lockdowns we’ve been through this year, so alter this based on more realistic figures if you think you need to. Collating figures together and coming up with a spend amount for each category over a number of months will enable you to then calculate an average monthly spend for each. This should be your guide for what you are likely to be spending each month in 2021, and it’s these figures we’re now going to try and reduce, just slightly, to enable you to put away enough each month to reach a £1000 savings goal. And remember, this goal is supposed to be on top of any saving you already do, so if you are putting money aside into an ISA or you have an active savings account then you need to maintain these.
Next you need to identify where you can cut, cancel or clear. For example, you may be able to cut the amount you are spending on your utility bills, or make some adjustments to your weekly food shopping bills. Then you should look for things you can cancel altogether. Maybe that gym membership that you never make use of or an online newspaper subscription you can do without. And then finally look for debts you can clear so that you can save money in the longer run. If you have outstanding balances on store cards for example, have a think about how long it’s going to take you to clear this at the rate you are currently repaying it. Then calculate the amount of interest you will pay over this time period. Every month sooner that you can repay this debt is money you can save, so think about how you might be able to achieve this. If you’ve got enough money to repay it already, do it.
You could save yourself a small fortune
Once you’ve got a list of all the costs you want to cut, cancel or clear, add them all up to show you the big picture of what those expenditures are costing you. Then work through the process of cutting them, cancelling or clearing them. At the end of this process you’ll have an idea of how much these costs are going to be going forward, and if you subtract this number from the original cost you’ll get a figure that shows you exactly what you’re going to be saving over the course of the year.
Now all you have to do is divert equal portions of this every month from your current account into your savings account and you’ll have successfully cut, cancelled and cleared your way towards your overall £1000 goal.
If you’re interested in finding out more about saving and investing check out our new magazine ‘Fixed’ which has loads of tips and hints about how to save cash.