How to start saving money - simple changes for big results
Saving up £1000 can sound like quite a daunting prospect, particularly if you generally get to the end of the month and there’s nothing left in the coffers, or you’ve already got a decent investment and savings plan in place and so nothing left to spare. You might even think it’s impossible and you’ll never be able to do it so why bother even trying?
Well, don’t be disheartened. There are plenty of ways to save cash and some of them could deliver you a huge boost towards your £1000 goal with just a few minutes effort by you. Here we take a look at some ideas which could get you back not just pennies, but hundreds of pounds.
The number one way you should be saving money
Even writing the words ‘Save £100s’ feels like one of those dodgy adverts in the second half of the newspaper, or a suspicious boosted social media post intruding on your timeline. But there are ways to save £100s which are real and they are so simple you’ll wonder why you haven’t done it before.
Let’s start with the most obvious one – switching utility suppliers. Before you groan and roll your eyes in a ‘not this old chestnut’ way, have a think about the fact that despite high profile campaigns telling consumers to switch and save, and a raft of new platforms which make it easy to do, a third of households have had the same energy supplier for more than five years. Not switching to secure a better deal is costing households millions. Average savings promised by platforms such as Uswitch and BillBuddy are around £300-£400 per year per customer. If you can get a deal saving you that kind of money you’re already nearly a third of the way towards your £1000 saving goal. Roll your eyes at that!
The key to swapping energy suppliers is to do it as regularly as you need to get the best deal. That might sound like a faff but modern switching platforms like Look After My Bills can do it all for you automatically. If you are concerned about some of the horror stories you may have heard in the press about administration mess ups which have caused confusion and hassle when switching between suppliers, be assured these are in a tiny minority and Ofgem is cracking down on the industry to make sure all suppliers are held accountable so that consumers don’t suffer.
The key is to remember you are the customer so utility providers need you more than you need them. You don’t owe them any loyalty and in fact in this instance loyalty doesn’t only not pay, it costs.
Bring your debt together to pay less
Another instant hit savings technique is to review your outstanding unsecured debt and see if there’s a way to consolidate some, or all of it, onto a lower interest loan. Recent research from The Money Charity shows that 25% of credit card holders only pay the minimum amount each month, and a further 15% of holders are in arrears. This means there is a huge amount of debt left on cards which is accruing interest at rates around 20-30% per annum. If this is you, stop. Now. Even if you can’t do a 0% balance transfer to another credit card you might qualify for a debt consolidation loan which offers you a much lower interest rate, and more than that it also offers you a planned exit from the debt you are in rather than simply revolving your debt for decades. Compare the Market regularly updates its listing of loans on offer and you can apply for them to consolidate not only credit card debt but also personal loans, store cards, overdrafts and even medical bills.
Be savvy when applying for a loan and make sure you have a calculator to hand. Once you can see what loans are on offer to you based on your specific personal circumstances, you’ll need to do some maths to make sure the terms are more favourable than the current debt you already have. Check not only the interest rate to be charged but also the term of the loan – extending the term, even if it’s on a lower interest rate, can mean you repay more in the long run. So dig out that O’Level/GCSE maths know-how and do your sums.
If you can find a decent deal it’s highly possible to save yourself £10s, £100s or even £1000s over the course of the loan depending on how much you owe – another great way to accelerate towards the £1000 savings goal.
Keep an eye on your mortgage
For the vast majority of people the mortgage on their house is their single largest borrowing, so it makes sense to take a quick look at this to see if there are any significant ways to save some money to help reach the £1000 2021 goal.
According to the FCA most people are attentive to when their introductory mortgage rate finishes and so switch to a better deal before going onto the lender’s reversion rate. However, as much as ten per cent of people don’t and somewhat surprisingly this rises to twenty per cent amongst first time buyers. This means there are potentially a lot of people out there who are paying far more for their mortgage than they need to. In fact the same FCA data suggests it could be as much as £2300 on average per mortgage, per year. So the first question anyone taking the £1000 savings challenge should be asking themselves is whether they are one of these people? And if so they need to get on the internet or on the phone to their mortgage broker to find out what their options are.
The second question, and this one is for everyone with a mortgage, is whether or not you should be looking for a better deal now so you can lock in a favourable interest rate for the foreseeable future. Most mortgage offers come with a time limit, so this means that the lender will guarantee the terms of the loan to you for a set period of time. After that time period has expired, if you have not taken up the loan, you will need to apply again to get a new offer. Some offers have a life span of up to six months. We all know the economy is slightly more unpredictable at the moment than it usually is, as the after effects of COVID19 settle in and the Brexit terms come into force, and interest rates are (at the time of writing) extremely low. So if your mortgage is up for renewal within the next six months and you’re not planning to move so don’t have to factor in any time allowance for a sale or purchase to go through, then it might be worth seeking a deal sooner rather than later. You may well find that by the time you take up the mortgage offer interest rates have risen and you’ve in effect managed to secure yourself a very attractive deal that you otherwise might not be offered.
Little changes for big results
While these first three ideas for cutting household costs are fairly well accepted ‘big hitters’ in terms of their potential to deliver substantial savings, we’ve got two more tricks up our sleeves which might surprise in terms of how much money they could help you redirect into your £1000 savings challenge.
The first one is so obvious you’ll wonder why we’ve included it. But we think it is so obvious that people might not even think about it. Consider the £1000 challenge in terms of what this actually means. All it requires is for you to put aside £1000 over the course of a year into a savings account. So that means £83.33 per month, or £19.23 per week, or £2.74 per day. If you do this, at the end of one year you’ll have £1000 in your savings account. So, if you have spare cash and aren’t struggling to make ends meet every month then for you the process might be as simple as diverting this cash away from your account into a savings pot every day, or every week, or every month, whatever works best for you. Perhaps the easiest process would be to set up a Direct Debit to your savings account on the day your salary hits your account. If you can do this then you’ve done it, the challenge has been achieved, and all with little or no real negative impact on you and how you want to live your life.
If, however, you’re not sure you can spare £83.33 a month then you need a different way to find this cash and surprisingly you might be able to find it in the supermarket.
If you can reduce your weekly grocery shopping bill by £10 per week then by the end of the year you’ll have saved £520, more than half of the £1000 goal. And we can break that £10 down even further by thinking about making savings of pennies on key products. Most of us have been doing at least some of our shopping online during the pandemic and one of the benefits of this is that we have easily accessible records for what we bought and how much things cost. Spend ten minutes having a look at the last few months records and you’ll begin to get a fairly good idea of what products you buy and how regularly. For example, you might find that you buy laundry detergent every two weeks and a bottle of ketchup every month. Take this list of regular items and try to find them cheaper elsewhere. If you shop at a higher end supermarket this might be as simple as looking at a slightly more cost conscious supermarket. And if you already shop in one of these already then take a look at what deals you could be getting if you went to a wholesaler such as CostCo. Saving 20p on a tin of baked beans might not seem like that big of a deal, but if you can find a variety of items to save money on you could be surprised by how quickly you can start to make those weekly £10 grocery savings we’re talking about. And the best bit is that you can make this change all in one go. Once you know what you can buy more cost effectively set up a regular delivery from the cheaper supplier and then let the savings begin. No more work required!