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Money saving and savvy spending

Do you tend to count the days until payday? If so, you may need to take better control over your spending and saving.

Ideally, you should always have enough of a financial cushion to deal with the extra expenses that life will definitely throw at you. And if you feel you don’t earn enough to build up these reserves, then it means you need to find the money by making savings elsewhere.

The good news is, it’s surprisingly easy to reduce your spending by making little lifestyle changes. Over a month, these small economies can build up enough to pay into a savings fund for emergencies.

Here’s our five-step plan for greater financial security.

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Step 1: Work out what you’re spending

First you need to get a picture of your regular outgoings. It’s not enough just to check your bank statement at the end of each month – in order to make this work, you need to itemise is. It’s not just about how much money you’re spending, but what you’re spending it on.

So as well as keeping bank statements (which you should anyway), keep a spending diary for a couple of months to find out where your money is going. Separate it into the following categories:

  • Bills
    • rent/mortgage
    • TV licence, phone & internet
    • utilities (gas, electricity etc)
    • council tax
  • Groceries and household essentials (e.g. toiletries, cleaning products)
  • Essential transport (e.g. for work)
    • Note: if you travel by car, include the total cost of running your car each month (e.g. insurance, servicing, vehicle excise duty etc.), not just petrol costs
  • Non-essential transport
  • Clothes
  • Subscriptions – e.g. gym memberships, film/TV services
  • Eating out – workday lunches you haven’t prepared yourself, takeaway coffees etc.
  • Leisure activities

Also identify any one-off annual costs (e.g. insurance premiums, holiday costs, a big purchase) and divide each one by 12 to get a monthly cost to record in your spending diary.

The diary will let you see exactly where your money is going. You’ll also be able to identify what proportion of your spending is essential and what is discretionary.

Learn more: Can I get a discount on my Council Tax bill?

Step 2: Draw up your personal budget

Now you can work out whether your current spending habits are in the correct balance. See what percentage of your spending is on essentials, deduct that from your monthly income (for now!) and see what’s left over.

Now deduct 40 per cent of the remainder. This is the amount you ought to be trying to save each month. The amount that’s left over is your discretionary spending – e.g. socialising, luxuries, holidays, hobbies, non-essential clothes and one-off expenses like gifts and celebrations.

Take this figure and compare it to the amount you actually spent on discretionary purchases. If you spent more in real life, then it’s time to try and identify some efficiencies.

Step 3: Save on non-essentials

Look at your list of non-essential spending and think about what you could live without. For instance, instead of a gym membership you could try cycling to work – and so keep fit while also reducing your transport costs. Or if you’re always socialising in expensive bars, try entertaining in each other’s homes more often instead. Takeaway coffees are a notorious expense: just one every working day might cost you over £650 a year. Similarly, swapping shop-bought sandwiches for home-made can easily save £10 a week, or over £500 in a year.

Next, consider any subscriptions to TV services and see if you’re getting good value. Are you paying a premium for sports channels you don’t watch? There’s nearly always a better deal out there.

Also remember that you can often find really good-quality clothes in many charity shops – even designer gear – which can potentially save you hundreds without compromising on style.

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Step 4: Find savings on essentials

Spending on essentials is unavoidable, but you can still make it more efficient. Here are some of the popular tips:

  • Switch to the utility providers that offer you the best deal
  • Shop at the cheapest local supermarket
  • Buy own-brand products instead of branded ones
  • Follow the deals (e.g. half-price, buy one get one free) especially on non-perishables that you can stock up on
  • Create a weekly meal plan to reduce waste
  • Resist impulse purchases
  • Collect loyalty points (if your supermarket offers them) to get discounts and vouchers

Even if you can reduce your weekly shop by just £10, that’s an extra £500 or more saved up in a year.

Step 5: Make extra money where you can

There are many ways you can scrape together extra funds without taking on another job. Look out for surveys that pay participants, or companies seeking mystery shoppers. You can also make a fair bit of cash selling things online, such as old clothes and toys, unwanted gifts, music and books, if you put in the time. There are also websites that enable you to earn extra cash by providing freelance services such as photography, art, writing, programming, marketing and music, so if you have a talent, think about putting it to use.

The idea isn’t to make a huge amount of extra money, just to create a small surplus so you can regularly put away savings. When choosing a savings account, look for one with high interest to try and beat inflation, and be ready to move your money if a better offer comes along. For longer-term savings, consider more adventurous investment such as a stocks & shares ISA. You can compare some of the best stocks & share ISA accounts on the market here.

How much can I save?

The amount that you yourself can save will depend on your income and spending, and how much you can improve your spending habits to be more efficient. However, here’s an example of the kind of savings you can achieve with just a few changes:

Change of behaviour


                  Annual saving

Daily coffee



Making lunch instead of buying it

c. £3.00


10% reduction of £50 weekly shop

£5 a week





Total saving:



Just those simple lifestyle adjustments could see you putting away over £1,600 a year into your savings. If you can find more, you should soon build up a comfortable emergency fund. Why not get started now?

For more savings tips, read our cash savings guide. If you found this article helpful, you might also find our article on how to make a financial plan informative, too!

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We’ll find a professional perfectly matched to your needs. Getting started is easy, fast and free.

About the author
Nick Green is a financial journalist writing for Unbiased.co.uk, the site that has helped over 10 million people find financial, business and legal advice. Nick has been writing professionally on money and business topics for over 15 years, and has previously written for leading accountancy firms PKF and BDO.