Saving money can be difficult and is often easier said than done. If you’re on a low income or stuck in a cycle of living paycheck-to-paycheck, saving every month may feel even further out of your reach.
A recent study by the Independent shows that a quarter of UK adults don’t have any savings, with one third blaming too much debt and high monthly outgoings as the issue. One in ten also admitted they spend more than they earn each month.
Whether you need to save money fast for a holiday next month or you are trying to save as much as possible each month for a wedding or house deposit, there are several ways you can cut costs and increase savings.
At OpenMoney, we understand the importance of having enough cash savings put away, so we’ve put together some tips of how you can save money on a low income.
Budget, budget, budget
The first step you should take in trying to figure out how much you can save is figuring out how much you spend. To do this, take a look at your bank statements and try to categorise payments into things like rent, bills, travel, food, subscriptions and anything else that works for you.
Writing all of this down can help you understand where most of your money goes. You may quickly realise that you spend £100 on work lunches every month or that you’re still subscribing to a service you don’t use!
Once you have all this information, split your spending into ‘committed spending’ and ‘disposable income’. Everything you need to pay for, such as bills or essentials, is committed spending and the rest is disposable income.
Now it’s time to start setting a budget for your disposable income. If you have £600 of disposable income a month, try to set yourself a budget of £400 – roughly £100 a week. Stick to your budget and you’ll save £200 a month which is £2,400 a year!
You can go even further and set budgets for each category you created like eating out, weekly food shops and entertainment to make sure you stick to your overall budget.
Switch and save
Another great way to save money quickly is to look at your committed spending to see if you can save by switching your current providers for services like gas, electricity and the internet.
Companies are always battling for your hard-earned cash and there’s probably someone out there who can offer you a cheaper deal than your current one. If your energy bills cost £100 a month and you’re offered a new contract for £80, that’s a saving of £240 a year!
Do this across all of your household bills and it’ll soon start to add up and fast.
Later this year we’ll be partnering with uSwitch to make it really easy for our app users to find out if they could save by switching their energy bills. Keep an eye out for more updates from us on that one.
Round it up
Look after the pennies and the pounds will look after themselves.
Most transactions are now paid with our debit cards, meaning we never see the money pass through our hands. An old-fashioned way of saving used to be putting your spare change in a piggy bank and watching it grow over time.
If you take that principle and apply it to your debit card transactions, the pennies will soon add up. For example, if you spend £2.70 on a coffee, simply deposit 30p into a savings account to round up the transaction.
Many banks offer this as a service that directly deposits your ‘change’ into your savings account. Get in touch with your bank to see if this is something they can offer.
If not, simply add up your transactions on a daily or weekly basis and deposit it in your savings account manually.
Be open to change
One of the most difficult things we face when trying to save is changing your usual habits.
If you’re used to buying a coffee on the way to work every day, starting to take your own coffee may be a difficult change to make.
When making these decisions you need to weigh up why you’re doing it and whether it's worth it to you. 1 month of bringing in your own coffee could save you £90 (if you spend £3 a day). A good quality bag of coffee can cost as little as £5 and you still get to have your morning coffee.
There is a limit to how far you should take this. Don’t stop doing everything you enjoy as you may start to lose the willingness to save. Finding the right balance of sacrifice and saving is key to reaching your goals.
Find out what you’re entitled to
Not everyone is aware of the benefits - such as tax credits - that are available to them from the UK government. This may mean they’re missing out on extra cash.
Try to take make use of all of the benefits that you can - they’re there for a reason!
Just like saving on your bills and rounding up your cash, these small wins can make a big difference over the course of a few months.
One final tip is to always remember why you’re saving in the first place. It’s often easy to make an impulse purchase that you didn’t need or get your favourite takeaway after a stressful day. If in these moments you remember why you’re saving, you can avoid plenty of unnecessary spending and watch those savings grow!