Research published by the Money Advice Service shows that 40% of British adults have less than £100 in savings. This leaves them exposed to all sorts of financial risks and will make it more expensive to deal with unexpected financial costs.
The figures are even worse when you separate it out by region. While the South East, which is the wealthiest part of the country, has 30% of its adult population with less than £100 in savings, it is worse in Northern Ireland and the West Midlands where the proportion skyrockets to 56.8% and 55.2% respectively.
Wales and Scotland weren’t far behind, with 50.1% and 48.4% of its adults having less than £100 to their name.
The research highlights a huge problem, with large proportions of the population not getting into a “saving habit”. Not having a cash reserve means these people will have to borrow money to pay for unexpected bills like a house repair or a garage bill. Borrowing money usually means paying interest, which increases the cost of the expense over the long term.
Not a Lack of Cash
The Money Advice Service’s research showed that around one quarter of those on low incomes (less than £13,500 per year) still have more than £1,000 saved up. Meanwhile, almost half of the households with no savings earn more than £30,000 per year.
From this, it has concluded that for a large proportion of the population the barrier to saving is that people adopt a “live for today” attitude instead of one that sets and works towards financial goals.
If you are one of these people and would like to begin building yourself a nest egg, then consider some of these options.
Set a Budget
Setting a budget is the first step towards saving money. You need to list out all of your fixed expenses; things like your rent/mortgage, utility bills, mobile phone, council tax, and commuting costs. These are bills you need to pay no matter what.
Then count up expenses that you can vary. These can include, food, meals out, entertainment, satellite TV, new clothes, and other discretionary spending.
You may also want to set aside a small amount each month for expenses you know you have to pay for every year. For example, dentist checkups, car servicing and MOT, Christmas and birthday presents. Add them together and divide the total by 12 to get your monthly cost.
If the total of these three categories of expenses is higher than your monthly earnings, you need to start cutting. You can’t usually cut the first group (apart from some exceptions we’ll get to shortly), so you’ll need to start reducing your discretionary spending (we’ll get to how later).
Keep going until you have an amount of money left over at the end of the month that will help you achieve your financial goal. For example, if you want £2,000 of savings after a year, you’ll need to set aside £167 each month.
Cut Discretionary Spending and Variable Bills
Now you have to find ways to make your spending habits fit your budget. Here are some ways you can do that.
Use Promotions, Vouchers and Coupons
Using vouchers and coupons may not make you look cool, but they will let you keep more money in your pocket. You can use them for almost everything too, so you’ll find ways to save money in just about every category.
Supermarkets and food manufacturers offer discounts and freebies to encourage you to try new products to promote loyalty. You can also find discounts and promotions offered by restaurants, entertainment businesses like cinemas and bowling alleys, and online casinos like Paddy Power Casino.
Remember to only use them if you were going to spend the money anyway. Visiting a restaurant because you have a voucher means you spent money you wouldn’t have otherwise, so it’s not a saving.
Use Loyalty Cards
Loyalty cards are another great way to cut your spending; they let you earn points and get discounts off spending in stores like Tesco and Boots. Again, just be sure you only buy things you would normally, otherwise you’ll not actually be saving money.
Ditch Satellite TV
Expensive TV packages from the likes of Sky and Virgin Media can really hurt your bank balance. You can find alternative options for TV, movies and even live sport through streaming services.
Many providers, including Amazon Prime Video, offer free trials, so use these first and then you can choose one to subscribe to for the longer term. At around £9 per month, these services cost much less than the most expensive TV packages from Sky and Virgin which can cost upwards of £50 per month. If you watch live sport, you may find that a NowTV Sky Sports pass is a cheaper way to watch games.
Cut Fixed Expenses
While you can’t usually cut your fixed expenses by much, there are some ways you can find savings.
Switch Your Energy Provider
Although you can’t change your water company in England, you can switch to a different electricity and gas supplier. Online price comparison sites like USwitch and Money Super Market provide you with a list of suitable alternative companies. If you haven’t switched before or for several years, you’ll likely save hundreds of pounds per year by moving to a new company.
If you own your home with a mortgage, you may find you can reduce your interest rate (and therefore your monthly cost) by switching to a new lender. If you are not on a fixed rate/term mortgage, then you will likely be able to switch.
You can do it yourself, with several sites online that can offer help. Alternatively, you can use a mortgage broker or independent financial advisor to find you the best deal.
Check Your Mobile Contract
If you pay for your mobile phone on a contract and you’ve had it for more than two years, you are likely paying more than you need to be. Contracts usually last for two to three years, after which you will have paid off the cost of the handset.
Some companies don’t lower the monthly fee afterwards though. So if you’re happy to keep your current phone for a while, look at switching to a SIM-only contract, which will be significantly cheaper.