It’s a real shame that finance and budgeting isn’t taught in school. Once we’re out in the real world, managing money and budget are an essential part of life.
Yet few people know anything about it!
That’s starting to change, driven in part by the current financial situation. However, the pace of change is slow and it’s down to us to help ourselves.
That’s where Savings Superstar and websites like it come in. I have taken it upon myself to provide the essential information you need to manage money.
As the topic is ‘money saving basics’, let’s start with the basics.
Money saving basics
You may know some or all of these, but as each provides a solid foundation for your financial wellbeing, I think they are essential to know.
So, without further delay, let’s get building foundations!
Set up a basic budget
I’ll be the first to agree that setting up a budget isn’t exactly interesting. But it is essential.
To be able to properly manage your money you need to know what’s coming in and what’s going out.
There are apps for that of course, but I prefer the manual method.
Building a budget by hand makes you think about what you have coming in and what you have going out.
It can also highlight unnecessary expenses and provide some quick wins.
So, while it’s a little more work, I think it’s well worth the effort!
- Set up a spreadsheet using Excel, Google Sheets or whatever you prefer using
- Add a column for income
- Add a second column for outgoings
- Add a third column for debt
- Add all your individual or family income (after tax) into the first column
- Use your bank statements to outline all your outgoings in the second column
- Subtract your outgoings from your income to see how much you have left at the end of each month
- Add any credit card debts, loan payments or other debts plus their interest rate in the third column
The more complete you make your budget, the more accurate it will be.
Itemise all your outgoings within the column and include everything you pay for during the month.
It may take a little while, but the budget is a very effective way to see in black and white exactly what’s coming in and what’s going out.
While credit card payments may be included in your outgoings, having the debt column concentrates the mind on what you owe and how much it’s costing.
If you’re lucky, you’ll have a little left over at the end of the month. If you’re not so lucky, you won’t.
Either way, you can now see exactly what’s going on.
Review your outgoings
Now you have a budget, you should be able to see clearly what’s going out.
A lot of that will be essential expenses like rent or mortgage, bills, insurance, food and fuel.
You may also have other expenses like newspapers, streaming services, gym memberships and other recurring charges.
Take a good look at each of these and assess whether you’re getting your money’s worth or whether you could live without them.
If you pay for Netflix or Amazon Prime, do you get your money’s worth? If not, cancel the subscription. You can always restart it if you end up missing it.
The same for club memberships and the gym. If you don’t get your money’s worth, cancel. You could always work out at home or exercise in other ways.
Set some savings goals
Now you have a clear idea of your finances and have perhaps saved a little by cancelling subscriptions, it’s time to set some savings goals.
Everyone needs some savings. Even if it’s just enough to pay the electricity for next month or cover a month or two’s food.
I appreciate that not everyone is going to be able to save much, if at all. However, even saving £20 a month will add up over time.
Having £100 in short term savings could be enough to pay for a boiler repair and stop you having to use a payday loan or credit card.
That’s reason enough to save!
Setting a goal is a key way to successful saving.
There are two common types of goal:
Short term savings goals – An emergency fund with 3-6 months’ rent or mortgage or all bills, a deposit for a car or enough to cover emergencies like boiler repair
Long term savings goals – A deposit on your first home, cash for an extension or loft conversion, college fund, money for solar panels or other large project.
You can combine these two goals so they work together.
For example, use a portion of what you have left over each month and put it away in your short term savings account.
Once it reaches a certain amount, move it to a longer term savings account and start over.
Rinse and repeat as much as possible, building up both savings accounts steadily over time.
As long as you don’t lock away all your long term savings in notice accounts, you should still be able to access them if something happens when your short term savings is empty.
Automate your savings
If you’re fortunate enough to be able to put money away each month, why not automate it?
Setting up a standing order for a certain amount each month can seriously help you save.
Even the most disciplined people in the world become distracted or miss a month. Setting up a standing order can remove your savings amount along with other bills.
This prevents it being swallowed up in household expenses or being accidentally spent.
I recommend setting up a standing order for savings on the same day as your rent or mortgage is taken.
Save at the beginning of the month and you won’t be tempted to spend it.
Reinforce the importance of an emergency fund
While it’s tempting to focus only on short-term and long-term savings goals, one key savings priority should be an emergency fund.
An emergency fund should cover at least three to six months of essential expenses, including rent/mortgage, bills, and basic living costs.
This financial safety net helps you avoid using high-interest credit or payday loans when life throws you a curveball (job loss, unexpected health issues, etc.).
Even saving a small amount each month toward an emergency fund can build a cushion that gives you peace of mind, knowing you’re financially prepared for the unexpected.
Update your budgeting strategy: 50/30/20 rule
If you want a clearer structure for your budgeting, consider adopting the 50/30/20 rule:
- 50% for needs – This includes essential expenses like housing, utilities, food, and transport.
- 30% for wants – This includes non-essential spending such as entertainment, dining out, and subscriptions.
- 20% for savings and debt repayment – Prioritise building your emergency fund and paying off debt.
This balanced approach ensures that you’re not just spending, but also saving and investing in your future, creating a healthier financial lifestyle.
Automate your financial check-ins
Once you’ve set your savings goals and automated your savings, don’t forget to conduct regular financial check-ins.
It’s easy to set a budget and savings plan, but it’s equally important to adjust them as your circumstances change.
Review your finances quarterly or whenever your income or expenses shift. This will ensure you stay on track to meet your financial goals, avoid lifestyle inflation (where you increase your spending as your income rises), and prevent overspending.
I did say this was about money-saving basics. But these basics form the foundations upon which your entire financial wellbeing can be built.
Having a budget is essential. You need to know exactly what’s coming in and exactly what’s going out.
There are apps to do the work for you, but they don’t always concentrate the mind like a manual budget does.
Plus, you can do what you like with a spreadsheet. You can add sums to calculate for you, duplicate your sheet for every month, and even link it to other spreadsheets.
As long as it gives you a clear idea of your finances, it’s doing its job. Plus, you control your data, which is just as important as knowing how much you spend!
Here are five relevant FAQs on the topic of saving money:
1. Why is it important to have an emergency fund?
An emergency fund is a financial safety net that helps you cover unexpected expenses, such as unexpected bills, car repairs, or losing your job. It gives you peace of mind, knowing that you won’t need to rely on credit cards or payday loans when emergencies arise.
Ideally, your emergency fund should cover three to six months of living expenses. If this feels too far out of reach, start small, even saving a few pounds a month adds up over time. Having this buffer can keep you from falling into debt during tough times.
2. How can I cut down on unnecessary subscriptions?
A great place to start when reviewing your outgoings is with your subscriptions. Many people forget about recurring charges for things like streaming services, magazine subscriptions, or online memberships. The first step is to list all subscriptions and ask yourself: Do I really use this? If the answer is no, it’s time to cancel.
For those that you use but don’t get full value from (e.g., gym memberships or premium streaming plans), consider downgrading or sharing accounts. You can always revisit these later if your circumstances change, but cancelling them now could free up a surprising amount of cash.
3. How do I start saving if I don’t have much left after paying bills?
Starting to save when you’re living week to week can seem impossible, but even small amounts count. If you’re not able to set aside a large sum, aim for £10 or £20 a month. Start with a short-term savings goal, such as building a small emergency fund of £100 to £200.
Once that’s in place, you’ll have a cushion to avoid falling into debt for unexpected costs. The key is consistency, not the size of the amount you’re saving. By automating your savings, even small contributions can accumulate over time without requiring much thought or effort.
4. What’s the best way to manage debt while saving?
Managing debt while saving can feel like balancing two priorities, but it’s possible with a solid plan. Start by listing all your debts and their interest rates. Focus on paying off high-interest debts (like credit card debt) first, while making minimum payments on others.
Simultaneously, try to build your emergency fund. Once you’ve built a small safety net, you can direct more of your savings towards debt repayment. It’s important to keep saving, even if it’s a small amount, as it provides a financial cushion and prevents further debt accumulation when emergencies arise.
5. How often should I review my budget?
You should review your budget at least once every 3-6 months, or whenever your financial situation changes. Life events such as a change in income, moving to a new home, or new recurring expenses (e.g., a child or a car) are all reasons to reassess your budget.
Regular check-ins ensure that you stay on track with your savings goals and make adjustments if necessary. By reviewing your budget periodically, you can spot any unnecessary spending and ensure you’re prioritizing savings and debt repayment effectively.
