Are you wondering how to save money? Be it amassing an emergency fund to cover you when things go wrong, establishing a healthy savings habit, or simply learning to budget so you can have more money available for your wants, learning to save is an essential skill for everyone. Here are our top tips on making those saving goals a reality.
Tips to Save Money
1) Set a Saving Goal
Consumers who focus on specific goals are able to save more when the saving goal is construed at a high level. A saving goal is a way to motivate you to save money. Your goal should be realistic and something that you are willing to work towards. Researches show that consumers’ savings can be affected by the way consumers think about their saving goals.
You should also reward yourself when you reach your goal. There are a number of different ways to set a saving goal. You can set a monthly savings target, for example, or you can set a weekly savings target. Whatever you decide, make sure that you are realistic about what is achievable and try not to set yourself too high a target. It is better to aim for small goals that you can achieve over time than it is to aim for one big goal that will take years to achieve.
2) Out of sight
The easier you make the saving, the more likely it is to happen. Check in with your bank if they offer you any automated services to help you save. Many banks have programs like cash roundups or automatic transfers to help you keep your savings habits on track.
It’s a good idea to open a separate savings account- perhaps even one you can’t see daily on your transactional account screen. Or you could even use a jam jar to collect change. Anything that’s easy, automatic, and out of sight when the spending itch hits will help you keep on track with your savings goals.
3) Think small
When we wonder how to save money, we often think too big. It feels like a few pounds here and there can’t make enough of a difference- and then we never get around to saving anything at all. £3 saved a day can add up to over £1000 a year, and best of all? You’ll never miss it! This is why many banks offer incremental savings plans like cash round-ups in the first place. So whether it’s by budgeting for one less takeout a week, or saving all your spare change to drop at the bank, don’t think any amount is too small to move you forward to your savings goals.
4) Reduce bills
Even if we have some bad budgeting habits, there’s no doubt that most of our money goes to paying bills. The lower you can keep those bills, then, the more money you have to save. Here are tips to cut back on your utility bills:
- A high utility bill is frustrating and can be a sign that something is wrong with your home. Even the most basic fixes can save you money, like adding insulation, using energy-efficient lightbulbs, upgrading the thermostat, or installing low-flow showerheads.
- You can also compare the costs of service providers (like the electricity company) and see if you can save by moving.
- Get a better deal on your mobile.
- Check in with your insurance policies annually, and renegotiate fees if you haven’t had a claim in that year.
5) Cancel unused subscriptions
if you have extraneous subscriptions you don’t need, get them canceled. Many of us have direct debits we never got around to canceling, a gym membership we ‘might’ use, or a streaming service we never watch. That’s eroding our savings.
You should cancel subscriptions or other recurring payments once you’re no longer using the service. It’s important to cancel your subscriptions before the due date so you don’t risk late fees and penalties.
6) Leverage loyalty
Loyalty cards can generate extra savings on items you already use. Don’t sign up for (and spend) just for loyalty points, of course! But if you can get a loyalty program on your fuel, existing medication or grocery shopping, and other purchases you will make anyway, that’s extra money in your pocket.
7) Use budgeting apps
Technology is your friend when building a savings habit. Budgeting apps can help you have an immediately accessible plan in place, making it easier than ever to stick to. Cashback and coupon apps can help you make small savings as you shop. And it usually only needs a barcode scan or picture of your receipt to access their deals.
8) Pay debts
This probably feels like the exact opposite of starting to save, but it’s actually an important step to take. Debt will leech the joy out of your savings, and the longer you carry it, the more trouble it will make for you. It’s near impossible to earn more interest on savings than you pay on your loans, so over time they simply erode your buying power and pull you deeper into debt. See what you can do through smart budgeting to pay down debt faster, and look into debt consolidation if you have a lot of little, high-interest accounts to deal with. While you will always need a certain amount of debt- in purchasing a house, for example, and possibly as an initial helper to get a vehicle- try to get out of the habit of carrying pointless debt like credit cards, overvalued and ’fancy’ vehicles to keep up with the Joneses, store cards, and overdrafts.
9) Make a (realistic) grocery list
A lot of our buying power gets fritted away on the food we don’t need, use, or (sometimes) even like! Check your cupboards and fridge before heading to the store, so you don’t buy needless duplicates. Make a shopping list (and stick to it) so you have a concrete plan and don’t just randomly buy items with no plan. Extra points if you make a meal plan for the week so you know exactly what to buy! And avoid the ‘healthy living’ trap. Many of us waste money on the produce we never cook, that simply hits the bin next week. Opt for frozen veggies if you’re not sure you will eat them fresh in time, and shop for the real you, not the fictional one you wish you were. If you add a habit of checking ‘no brand’ items first, as they’re often of equal quality to branded items, you’ll soon be saving on shopping trips, too.
10) Use cash-back apps and coupons
Cashback apps and coupons are great ways to save money while doing your necessary shopping. As the name suggests, cash-back apps offer cash back when you purchase certain items.
You can also sign up for a few coupon websites to follow the best deals. Consider using coupons at grocery stores and other retailers to save money on the things you buy most often.
By using both cash-back apps and coupons, you can save a lot of money! Just make sure that you’re not spending more than you would normally because of the advantages.
Applying Savings Tips More Effectively: Behavioral Finance View
As we delve into the world of finance, specifically the realm of saving money, it’s essential to understand that our decisions are not always governed by logic. In fact, human behavior and psychology play a significant role in our financial decisions. Enter Behavioural Finance – a field that combines cognitive psychology and conventional economics and finance to provide explanations as to why people make irrational financial decisions.
In their seminal work, ‘Choices, Values, and Frames,’ Daniel Kahneman and Amos Tversky underscored how our decision-making is often influenced not by rationality but by cognitive biases, providing a pivotal basis for understanding behavioral finance and its profound impact on how we manage our finances.
Understanding the various biases and heuristics will equip you with the necessary insights to better apply saving tips, enhancing your financial decision-making process.
1. Status Quo Bias
We tend to be more comfortable with the familiar and resist change, which is known as status quo bias. This can be detrimental when it comes to saving money because it prevents us from exploring better alternatives. For instance, if you’re used to a certain lifestyle, you might resist cutting back on certain expenses. To overcome this bias, it’s important to regularly review and reassess your financial decisions and be open to change.
2. Anchoring Bias
Anchoring bias refers to our tendency to rely heavily on the first piece of information (the “anchor”) when making decisions. For instance, if you’re used to spending $50 on a meal, you might think that a $30 meal is cheap, even if it’s still more expensive than necessary. A way to combat this bias is to always research and consider various options before making any financial decision.
3. Mental Accounting
Mental accounting refers to our tendency to categorize personal funds differently, depending on various subjective criteria, like the source of the money and the intended use for each account. We may treat money differently based on whether it comes from salary, gifts, or lottery winnings, for example. This can lead to irrational spending behaviors. To avoid this, try to treat money as a single resource regardless of its origin.
4. Present Bias
Present bias, or hyperbolic discounting, refers to the tendency for people to prefer immediate payoffs to later payoffs. This can severely impact your ability to save for the future. Overcoming this bias requires self-discipline and the realization that future benefits can outweigh immediate gratification.
These behavioral heuristics and biases have a profound influence on our financial decisions. Understanding these concepts is a crucial step toward making rational, well-informed decisions about saving money. By acknowledging and combating these biases, you’ll be well on your way to a healthier financial future.
Conclusion
Saving money is one of the crucial pillars of financial freedom. There are many reasons why people choose to save money, but three of the most common goals are buying a home, investing in financial products, and paying into a pension plan.
For many people, purchasing a home is the largest financial investment they will ever make. It can be helpful to have a savings fund to cover the down payment and any unexpected repairs or any costs related to buying a new house.
Investing is another popular reason to save money. By setting aside money on a regular basis, investors can take advantage of compound interest and grow their wealth over time. Finally, saving for retirement is an important financial goal for many people. By paying into a pension plan, savers can enjoy a comfortable retirement while also taking advantage of tax breaks. Whatever the reason, saving money can help to achieve financial security and peace of mind.
When learning how to save money, your first goal is to make it easy to do, so you stick with the program. Secondly, it’s about looking at how to optimize your bills and cut back on money drains.
Then you need to look at your budgeting for wasteful behaviors. And don’t forget to build an emergency fund to avoid going into debt with unexpected expenses. With those four principles in place, saving will soon be an easy habit!
John is a prolific writer and expert in the realm of personal finance, distilling complex financial concepts into digestible, actionable advice for his readers. His articles cut through the noise, providing clear and concise advice on managing money wisely and creating sustainable income streams. John is passionate about empowering individuals to take control of their personal finances and believes that with the right tools and knowledge, anyone can craft the life they desire.
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