Despite the news of the increase in household savings in the UK, there might be many struggling to save enough towards financial goals. This may be due to less income received when furloughed, loss of jobs, or just the difficulty in saving enough for goals that require a big cash outlay.
Often, the majority without 6 figure incomes and inheritances have to walk the journey to financial freedom one step at a time. This requires running a tight budget initially. Spending less than you earn is the golden rule of financial stability. This is what keeps debt at bay and allows you to save for your goals.
I am continuously looking for ways to stretch my income and increase my savings rate. These 5 ways to save money on a tight budget have been my go-to steps. Beyond saving for a specific goal, these 5 ways to save money on a tight budget will help you set good money habits that will be sustainable.
Table of Contents
Do a budget review
One of the ways to save money on a tight budget is to tighten the budget itself. This step underpins every other action you take. If you don’t have a budget, create one. If you have a budget, it’s time for a review. The purpose of this is to find savings.
Most organizations have a budget setting or resource allocation process. Regardless of the type of budgeting methods used, when activities to be undertaken in a given budget period cost more than the resources available, budget holders are asked to go and do some work to close the gap. As a Management Accountant, part of my role is to assist budget managers to find opportunities and efficiencies so that the desired profit/surplus of the organization is met.
Similar to what happens in organizations, when your available resources are stretched, it’s important to review your budget to find efficiencies. Here are some of the things you can do when reviewing your budget;
Go through every item line by line
As mentioned in my previous blog post: make your money go further with a savings rate boost sometimes you need to decide what needs to change in your budget. Find items of expenditure you can do without and convert them to savings. For instance, do you have a budget for take-out? can you reduce the frequency? Cancel subscriptions you don’t use and cut discretionary items that add the least value.
Note the monetary value of what you are changing. If you find £100 monthly of activities you can do without, that will be £1200 in a year converted to savings. Imagine if you can even go higher? £200 will give you £2,400 and so on. Now add in some compound interest and you begin to see the difference.
What you take out of your budget is up to you. How streamlined you make your budget depends on the intensity you adopt. If you give your savings a job when writing your goals and you have a “why” for your goals and a timeline, this will motivate you to really go for it.
Renegotiate all contracts
Are there subscriptions or contracts that can be renegotiated? Look through your budget and check this. Most fixed-term contracts convert to variable rates when they expire. I realize over time I have lost my haggling spirit. Back in Nigeria, you have to haggle when you go to the market. Unless you are in a supermarket, there is nothing like a fixed price. I think this is taken overboard sometimes but it is a very good skill to have.
Negotiate every time where possible. Call your utility providers when contracts are expiring, make use of comparison sites and be ready to switch. If you want to avoid switching hassles then go to your current provider and asked if they can match the better price you find. Never allow insurance rollover. To prevent this from happening, create a billing schedule and mark it in your calendar.
Watch out for the big items
If you are saving for big goals on a tight budget, look out for the big expenditure. It might be easier and quicker if you target the biggest expenditure. Our 2 biggest expenditure is housing and childcare. So when we needed to save up a house deposit, we had to save on rent. This meant living in a much smaller flat than we would have liked.
Cutting coffees and avocados (or other small treats you indulge in often) will likely not help a great deal towards a big savings goal. I think it is still good to cut down the coffees in principle. It is one of those very unnecessary expenditures given how cheap you can make them yourself. In the spirit of looking at the big items, I focus more on eating out than coffees because one visit to a restaurant will cost about £50 compared to a £4 coffee.
Separate and Automate your savings
The second on my list of ways to save money on a tight budget is automation. After making sure you can squeeze out enough from your budget to save, automate it if you can. It’s just much easier to get that saving out of the way into an account that is not accessible. There are no credit checks for savings accounts so you can open as many as you want. Over the years, this is has been a very important aspect of saving for me.
Every goal can have savings account if that is what works for you. You should have at least one savings account that is separate and do a standing order for the amount you have to save monthly. This forces you to manage what you have left. If you can automate and act as if your savings account doesn’t exist, you will be surprised at how much more you can accumulate.
Learn to organise
If you are on a tight budget, the slightest overspend can tip you over and prevent you from saving so it is important to stay disciplined in order to stick to your budget. One of the ways to save money on a tight budget is to get organized.
Not everyone is organized. Some personality types love fluidity and impulse. However, this can be a learned behavior. Over the years, my level of organization has grown more out of necessity. Here are some ideas on how getting organized can help you keep to budget and save;
Meal plans and grocery list
I have to admit that I have been finding it challenging keeping to budget with our grocery shopping. Maybe the budget amount needs adjusting now that we are home more. It is important to be as efficient as possible when looking for ways to save money on a tight budget so I have been on a mission to cut down our grocery costs.
One of the acclaimed ways to do this is to write a meal plan and make your grocery list based on your meal plan. That way you only buy what you need to make your meals. Going to the shops without a list is a sure way to overspend. There is a lot of work put into the displays of items to attract customers and encourage them to buy things they don’t need. So a meal plan and a list are the holy grail of keeping grocery shopping low.
Bulk cooking
As a busy mum of two, one of my coping mechanisms has always been bulk cooking. If there is something on my meal plan that reoccurs weekly, then I cook 2-3weeks supply of it. It saves me time and energy as you will need more gas/electricity if you cooked 3 times. Sauces like bolognese or tomato that can be paired with easy to cook mains like rice/pasta can be batch cooked and frozen until needed.
A chest freezer was an item in most Nigerian homes when I was growing up for storing food purchased in bulk. Some people like eating fresh food, but that is a luxury for people with time and maybe a load of help. There are ways to freeze food in order to retain freshness so what is needed is an open mind, creativity, and a desire to save time and money!
Activity planning
Similar to a meal plan, activity planning can help you save more money or curb your spending. Nowadays retail therapy can be gotten easily online or physically so it is important to avoid browsing shops as a time filler if you always end up buying something.
The same applies to activities with friends and family, there are so many free activities and parks that you can take advantage of if you check and plan ahead. During the pandemic, we discovered woodlands at our doorsteps that have always been there. Holidays are another big item on the budget especially for families with children because everything costs twice as much during school holidays. Trips abroad have been one we have had to let go of when things are tight. The great thing is that our summers are still easily filled with fun activities that cost less.
If you don’t have access to green spaces or need to stay indoors more, plan activities you can do at home. Board games, musical chairs, disco night, family sports day (remember the egg and spoon race?), lego building competition, and art competitions are all great activities. You can tailor activities to the age of children or the preferences of the people involved, you can also invent and create new traditions. The focus is making memories with the people you love, where you make it is not as significant as people think.
Think about selling
Do you have any unused or underutilised items to sell to give you a buffer or subsidise some of your expenditure to free money for savings? This may or not make a huge difference depending on how much stuff you collect. But you can start with items of clothing, books,s then gadgets and furniture that you don’t need. For example, when I want to buy new clothing for the kids, I sell some old stuff to add to my clothing budget, and every little helps.
Like everything else, you might not have thought about it but if you looked enough there will be something to sell. It is easy to sell items online these days. Here are some popular sites for selling your preloved items:
Facebook Market place
This is my first port of call for items that are easy to collect. It is also free as most platforms will take fees or a percentage of your sale. Be careful though and make sure you read Facebook’s guide for buying and selling. You will get time wasters and there will be a security element to consider. However, it is easily the best place to sell, so join your local or town group and advertise your items.
Vinted
I have downloaded the vinted app but I haven’t used it yet. It is pretty much an app where you can list clothing that you no longer need for sale and it is free! I have been collecting clothing for charity so I haven’t sold items recently but I plan to put some seasonal items on vinted to try it. Let me know if you have any experience with vinted in the comments below.
Ebay
eBay has been the industry-leading selling platform. Even though you incur selling fees, they run a lot of selling promotions you can take advantage of. I have used eBay both to sell and buy new and used items. It is easily one of the best sites for selling used stuff. The advantage of selling on eBay is the added protection and support you get.
As with most things, there is a system for selling on eBay that you need to familiarise yourself with. For instance, I didn’t pay much attention to delivery costs when I started selling on eBay so I made a few losses because of this. It is important to check the weight of your parcel to ensure you are passing on the right delivery cost to the buyer. The same I suspect will apply to Vinted.
Amazon
And finally, Amazon! I remember selling my used textbooks on Amazon ages ago. Even though the platform has evolved a lot since then, I believe it is still a good platform for selling used items. It is important to consider and compare selling fees to other selling platforms.
Consider income
If you have lowered your lifestyle to the bare minimum and tightened your budget till there is no wiggle room, it is time to shine the torch on your income. I am frugal to an extent but there are things that I will happily splurge on like a meal out every now and then, a holiday whether it’s local or abroad and a few nice dresses occasionally, no designers, mostly high street and reasonably priced.
I can do without the things aforementioned if necessary and they don’t determine my happiness but they are things I don’t want to do without permanently. So when looking through your budget, pay attention to your income and whether it is enough to sustain your lifestyle and long-term goals if not make a plan to boost your income.
Conclusion
I have been on a mission to boost my savings and these ways to save money on a tight budget are ones that I have tried and tested. If you plan on trying any of these suggestions and have questions, feel free to email me at tolu@valuespeaks.com.
Remember to create value by meeting a need and have a fufilling and valuable week!