So you want to increase the amount of cash you’re saving each month. The quickest way to achieve this is by cutting down on your spending. It’s as simple as that. The tricky part is knowing which bits of your spending to cut down on.
In the example SSBS you’ll see in the outgoing column items you may be familiar with. Just in case you can’t remember, here it is again.
The easiest way to see what could be chopped off your monthly spending is by prioritising what you need to live and go from there. So my approach would be to start with the basics and work your way back.
- Council Tax
- Phone line/Internet
Now, ‘The Basics’ are going to different for different people. You may decide that your mobile phone or contact lenses are items that you cannot do without and that’s fine. For me, anything that comes after the above is a luxury and the cost should be watched like a hawk, if not cut out all together.
So going back to the SSBS example. One outgoing that I would certainly consider ditching is Sky TV. By cancelling Sky TV you’re already able to save £50 per month without making any other lifestyle changes. Over 12 months, that’s £600!
If I’m about to make a monthly commitment for the foreseeable future, the quickest way to decide whether it’s worth it for me is to times the monthly amount by 12.
|Product||Monthly Cost||Annual Cost|
The yearly total on these two services would be £203.76. Now to me, I would prefer to have saved that £203.76. However, if you’re a film/TV buff and enjoy these services, that’s fine. So long as you are aware of the potential savings that can be made by cutting out the non-basics from your outgoings.
So now you’ve reviewed your outgoings and are happy that you’re saving enough but you may be saying to yourself ‘but what am I saving for?’. For me, it’s piece of mind. Having a cash pile in the bank will reduce those anxiety inducing situations like having a car problem or needing to replace a boiler at home. A savings target of between 6 to 12 months of your take home monthly salary will put you in a very comfortable position.
There are many, many more ways in which to reduce your monthly outgoings. If for example you commute to work by car with a journey that is less than 4 miles and you live in a town or city, consider cycling or taking the bus. If you happen to live in a very expensive part of a town/city. Considering moving to a cheaper part or closer to work in order to reduce those commuting costs. Cook more at home instead of eating out. Cook larger portions of food when you do cook so you can take them to work instead of buying lunch. Get into the habit of multiplying the cost by the number of times you do it. Last example, I promise. Lunch at the sandwich shop each working day of the week.
£5 x 5 (Monday – Friday) = £25
£25 x 4 (roughly the number of weeks in a month) = £100
And just to hit this home £100 x 12 (yep, the number of months in a year) = £1200.
Now is that shop bought lunch really worth 1200 of your hard earned pounds? O.k admittedly this is extreme but I’m hoping it’s helping with demonstrating where you can save and how even saving small amounts can have a big reward.
Fantastic, so now you’re budgeting like a pro, the debts going or gone, the non basic outgoings have been exterminated and you’re on your way to having a nice pile of cash just smiling at you when you check your bank account. You may be wondering what happens when you’ve hit your saving target, well I’m glad you asked. Up next we will look at what you can do with this extra cash to make it do more than just smile at you from your bank account.