In Sunday’s Observer, journalist Polly Vernon wrote that her coffee habit had so far cost her around £20,000 (four large cups a day, at £2,000 a year). And, as she says, she’s not the only one – 11 million of us visit a Starbucks, Costa or Café Nero every week. Cut out that little habit and you’ll soon save enough for that Gaggia espresso machine.
2. Round up when you spend
Some US bank accounts will round up your purchases to the nearest dollar and put the excess into a savings account for you. I haven’t seen a UK equivalent, though it may well exist. In any case, you can do the same thing yourself.
3. Organise a direct debit
Each month, siphon off a set amount from your current account directly to a savings account. That way your money will grow without you having to think about it. You’ll find that you adjust your spending accordingly and, when you remember to check into your savings account, there will be a nice surprise waiting for you.
4. Open an ISA
A cash ISA is the first place you should put your savings. UK taxpayers are allowed up to £5,640 tax-free savings each year. Many ISAs are instant access, allowing you to access your money. But once it’s withdrawn, you can’t then redeposit it. Check out some of the best rates here.
5. Look at your monthly outgoings
Obviously many of them – like rent/mortgage and bills – are unavoidable. Some, like your mobile phone or gym membership, you may also consider non-negotiables. But there will be many areas where you can cut costs. All those dull-sounding sacrifices – cycling to work instead of taking public transport, avoiding that weekly takeout, taking a packed lunch instead of going to Pret – really do make a difference. Make a game of it – see how much you can cut your monthly spending by, and then stick the difference into a savings account.
6. Don’t be afraid to start small
It’s tempting to think that saving is pointless unless you’re putting aside a few hundred pounds a month. This isn’t true. The easiest way to save is to put aside meagre amounts of money that you won’t miss. They’ll soon add up.
7. Have a goal
It helps if you’re saving for something. That might be the deposit on a flat, a holiday, or just a blow-out night. Either way, if you reward yourself with something tangible, saving becomes a much less punitive experience.
Nice list, Alex. I find that regular savings accounts can help. The higher interest rates you can get act as an incentive and the money will be automatically transferred into the account every month, meaning that it’s difficult to break your commitment.
I’d also suggest a mind hack: change the way you think about saving. Don’t save for a rainy day. Don’t save so you can afford stuff. Save to grow your money and to reduce your reliance on employment. When you start chasing things like high interest savings accounts, social lending and dividend paying shares, you’ll be surprised at how much money you’re willing to commit to your cause – because you know it’s not just sitting there. It’s actively working for you, making you richer.
Great post.
With regards to #2 on your list, LloydsTSB here in the UK actually offer a service through their online banking called ‘Save the Change’, you can nominate a particular account for this money to be ‘collected’. I personally have it set to a separate savings account for rainy days, it quickly adds up!
Darren
I recently cancelled my gym membership as I can save £384 a year by exercising using the Wii, going for runs or bike rides outside and using weights, balance balls etc. at home.
The coffee machine at work is free so that saves me a fortune. I have an ISA with a mix invested between cash and shares, the shares part unfortunately isn’t doing well at the moment.