How to be brilliant at saving money
Posted on 20 January 2019
The Japanese believe that tidiness in one’s finances is as important as tidiness in one’s house – indeed for them, the act of thinking mindfully about where one’s money goes is in itself a recipe for calm and wellbeing.
If you’re not convinced that the path to a balanced mind comes through balancing the books then keep reading. Budgeting is at the top of my list of calming activities and here are the six things that help me feel in control and find the fun in finance.
1. Take on a budgeting challenge
One of the most well-known budgeting challenges is the 52 Week Money Challenge. Week one you save £1, week two you save £2 and so on. The problem I found is that it’s just a bit too challenging! So if you like the idea of a budgeting challenge but want a slightly easier version then the 1p Saving Challenge described on Skint Dad’s website can still net you an impressive £667.95 in just twelve months. You could also create a budgeting challenge of your own: hop over to my YouTube channel to find out what challenge I have undertaken this year.
If you think you can take on the hardcore option then the 52 Week Money Challenge will put £1378 at your disposal by the end of twelve months. To put yourself in the best position of achieving it, you may want to consider one of the variations (such as going backwards or doing the weeks in a random order), which prevent you from having to find £202 to put aside in December.
Whichever challenge you take on, I would recommend working out the purpose of your savings too: will it create an emergency fund; be your clothes budget for the following year; pay for a holiday. Once you have an aim in mind, you will be much more motivated to put the money aside.
2. Pay bills to yourself
A YouTuber called Darlene Michaud introduced me to this idea and it has really stuck with me. Her goal is to save for her retirement and she treats it as her most important bill. Whatever else happens that has to get paid each month.
One way of making this really stick is to open another bank account and set up a standing order from your main bank account. This makes it feel a little more like a bill. Ideally you’ll make sure that it’s a bank account that (a) is impossible to access – let’s face it, the billions of passwords normally required to get to a bank account online make this quite doable – or (b) has incentives built in that make you disinclined to withdraw the money. Many banks have regular monthly saver accounts that pay relatively high interest rates if you put money into them regularly so that might be worth checking out.
When thinking about implementing this saving strategy, you can take two approaches. The first is to save as much as you realistically can. This offers the greatest reward and so can really motivate you once you have had a little success. On the other hand, you could start small and set up a standing order for £1 a week. See if you miss the money. If you don’t then that’s great – you’ll have £52 in your pocket at the end of the year that might have otherwise been spent. You’ll have mastered the mindset of paying yourself a bill and can think about increasing to a slightly more challenging/rewarding amount.
3. Use cash and save the pennies
I always remember my Mum laughing at me for using my card for a 25p chocolate bar. It did feel a bit strange when I thought about it but the truth was I never had any cash on me.
Two years later and cash has my vote. The main advantage is that it makes me more mindful about my spending. It stops me buying more things just to reach a minimum card spend in smaller shops. Plus if you decided to take on the 1p Saving Challenge then you will always have pennies at your disposal.
Oh and in case you are wondering the source of my super-frugal chocolate, it was a Freddo!
4. Be generous
When you are budgeting it is tempting to scrimp and save on every category but this isn’t always the best approach. Take food, for example. People often think this is a good place to save money and that’s true. But there is a lot to be said for giving yourself a generous budget in this category because if you attempt to cut too many corners then you are likely to end up hungry, unmotivated to meal plan or uninspired by your diet. The result of that is usually you end up spending more on quick-fixes: ready-made food, junk food and takeaways. So be generous. Allow yourself enough to buy ingredients for all your favourite, yummy, life-affirming meals and you won’t be so tempted to buy all the non-treating treats.
This equally applies to other categories that are important to you. If budgeting ends up being all about denying yourself stuff then you’re not going to be motivated to do it so be generous and kind to yourself.
5. Get yourself some good budgeting software
There is a lot of budgeting software on the market and I have tried it all! For a long time I used Microsoft Money and I loved all their fancy graphs. Then I switched to a piece of software called Budget. This used the envelope method of budgeting, where you create an envelope for each category of your budget and split out all the cash when your pay cheque comes in. This approach got me thinking about my budget differently and I really enjoyed using.
Latterly I have switched again and I am now using YNAB. It’s a slightly pricey option with an annual subscription but the investment is proving worth it. I am saving more than ever before, feeling really motivated and thinking much more intelligently about my spending. Of course, you can just make yourself a simple spreadsheet or track your spending on paper. But it is worth having a look at the budgeting software options if you need a little extra motivation.
6. Get inspired
If you still feel a bit bored by budgeting then there are plenty of inspiring stories to ignite your interest. I recently read the Year of Less, which I can highly recommend, and have started You Are a Badass At Making Money, which is excellent too. YNAB have a fantastic YouTube channel where they feature a regular podcast series called Debt Stories and workshops on topics such as saving money on groceries. The minimalism movement may provide inspiration from a different angle. Finally, figuring out what you would like to gain from budgeting can help keep you motivated when making those difficult decisions.
What budgeting tips do you have? Let me know below.