How to save money

Create a budget

One of the best money-saving techniques is to create a budget. This will help with expense tracking, giving you a clear picture of exactly what you’re spending, where and when. To start saving money take the steps below:

Determine your income

The first step to saving money is to take a look at your recent bank statements and make a note of your income. This includes:

• Your take-home pay (your salary minus tax)
• Pensions
• Any benefits you receive, such as Universal Credit, Jobseeker’s Allowance, Income Support, Housing Benefit, Employment Support Allowance, Personal Independence Payments or Child Benefit
• Child maintenance payments
• Rented spare room income or contributions from grown children or other household members
• Any regular contributions from other sources

Calculate your outgoings

Next on the how to save money list is to jot down all your outgoings. This should include:

• Household bills, including energy, broadband, water and your rent/mortgage and Council Tax
• Expenses such as car and home insurance, life insurance or pension contributions
• Debt repayments such as credit cards and loans
• Money spent on regular items such as travel, fuel or train tickets
• Other spending, such as money on clothes, gifts and eating out.
• Look for items paid quarterly and annually not just monthly, such as TV licence, annual subscriptions or membership fees
• Identify high spending times of the year – Christmas, holidays or maybe there are lots of birthdays in one specific month. If you or your family play or watch sport, are there times of the year when you need match fees or new kit – or a season ticket?

Track your spending

To really save money you need to keep a close eye on your spending. Use online banking and mobile apps to check your accounts regularly. Set alerts for large items of spending or when you have a low balance in your account.

Some accounts will send alerts every time you use your debit card, which means you can check you didn’t overpay and will alert you instantly if your card is stolen or cloned and used illegally.

Consider using more than one account and card so different spending can be limited by only putting in that account what you can afford to spend.

Set realistic savings goals

People who are serious about saving money set saving goals. These can be a combination of regular monthly saving and topping that up with any spare cash. But savings goals need to be realistic as it’s easy to lose motivation if your targets aren’t manageable.

Goals could include:

• Building an emergency fund. This gives you a savings cushion to fall back on if you need to pay for an unexpected bill, such as car repairs
• A holiday
• A new car

Automated saving could help you move cash into a separate savings account. It’s easier to save when it’s automatically done for you as you won’t be tempted to spend that cash instead. You could, for example, set up a standing order to transfer £50 a month (or whatever you can afford) from your bank account into your savings account.

If people send you money for birthdays and anniversaries, why not get them to send it straight to your savings account?

Budgeting methods

There are range of budgeting methods top savers use which you could adopt to help you save money. Some of these are outlined in the table below:

Review your existing debts

Debt reduction is an important step to saving money so it’s worth carrying out a full review of your existing debts to see if they can be better managed.

Remind yourself of the amount of interest you’re being charged on debts such as credit cards, personal loans and mortgages. Then look into whether you might be able to switch to a cheaper deal. As well as potentially saving you money on your monthly repayments, you might also pay off your debts faster.

Credit card debt

If you have existing credit card debt, you could save money by transferring it to a 0% balance transfer credit card. These cards charge no interest for several months, which means all of your repayments go towards paying back the debt, rather than interest. You’ll often pay a transfer fee of around 3% of the amount transferred, but you could still save money overall.

If you don’t qualify for a 0% balance transfer credit card, look for one that charges a lower rate of interest than you’re currently being charged. You could still save hundreds of pounds in interest payments and some of these cards don’t charge a transfer fee.

For example, if you moved a balance of £2,000 from a card charging 24.9% annual percentage rate (APR) to one that charges 10.9% APR, the table below from a major credit card provider outlines how much you could save when paying off £100 a month:

Personal loans

If your credit score has improved since you first applied for a personal loan, you might now qualify for a cheaper loan. If so, you could take out a new loan at a lower APR to repay what is left of your initial loan and save money. But check that you won’t pay any early repayment charges first.

If you have multiple debts (credit cards, loans, overdrafts), a debt consolidation loan could combine all those debts into one place, ideally at a lower interest rate. This could also help you to pay off your debts faster.

Mortgages

If you’re currently on your mortgage lender’s standard variable rate (SVR), you could be paying more interest than necessary on your mortgage repayments. The SVR is the rate you move to once your existing mortgage deal has come to an end – often after two, three or five years.

According to HomeOwners Alliance, the standard variable rates can be four or five percentage points higher than the best available fixed rates. Note that you’ll need to have at least 40% of equity in your home (the amount you own) to qualify for the best mortgage rates. You’ll also need a good credit history.

According to the Financial Conduct Authority (FCA) 74% of mortgages have a fixed rate period, with half of those having less than two years left before they switch to variable rates.

Energy and utilities

Finding ways to trim energy and utility bills can make a big impact on your ability to save money.

Conserve energy

The table below outlines how much money you could potentially save by making a few simple changes around the home.

Source: Energy Saving Trust

Energy-efficient appliances

If you need to buy a new appliance for your home, such as a fridge freezer or washing machine, look for its energy label and choose the most energy-efficient appliances.

Appliances are rated from A to G, with A being the most energy-efficient and G being the least. Using these labels can help you to find an appliance with better energy efficiency, saving you money.

Figures from Citizens Advice show that 100 washes with an A-rated washing machine cost £13, while 100 washes with an E-rated washing machine cost £23.

Utility providers

It’s worth running a comparison of all utility suppliers every so often to see whether you can find a cheaper energy deal to switch to.

Check that you’re not currently tied into a contract as you may pay a penalty fee if you try to leave early.

Food and groceries

Frugal living doesn’t mean having to cut back completely. But there are money-saving steps you can take to reduce the amount you spend each month on food and groceries.

Supermarkets

Choose your supermarket wisely. Aldi and Lidl tend to offer cheaper prices compared with Sainsbury’s or Waitrose, for instance.

But shopping at these discounters is only likely to be cost-effective if you have one local to you. If you need to drive miles out of your way to get there, you might end up spending more on petrol than you’d save on food.

It can also pay to make the most of couponing. Supermarkets such as Sainsbury’s and Tesco sometimes offer coupons for selected products when you shop with them. You can also download apps such as Shopmium to find even more discounts.

Stores own bonus schemes, such as Tesco Clubcard or Nectar points, can also give you deals not available to others.

Bulk purchases

Buying in bulk can work out cheaper, particularly if you’re stocking up on non-perishables such as toilet rolls or tinned food.

But think carefully about buying in bulk if goods go out of date fast or if it’s something you’re unlikely to use a lot of. Otherwise, you could end up wasting money.

Make sure you check the per unit price – sometimes bigger packages actually work out more expensive.

Eat less meat

Eating less meat can help both your health and your bank balance. Think about swapping out meat in your meals for other protein-rich foods such as lentils, grains and beans as these are generally cheaper.

You don’t have to cut out meat completely. But you could aim to have more meat-free days each week.

Eating out

An easy way to cut spending is to eat out less frequently. When you do eat out, follow these money saving tips:

• Check sites such as vouchercodes.co.uk and myvouchercodes.co.uk to find discounts and deals at a range of eateries.
• Ask for tap water rather than bottled as it’s free.
• If you’re ordering takeaway, order directly from the restaurant rather than through a delivery service as these often charge extra.

Meal planning

Set aside some time before the start of each week to plan what meals you will cook each day. Meal planning like this can prevent you from buying food you don’t need, help you work out which ingredients you can use for multiple recipes, use up leftovers and reduce food waste.

Growing vegetables

Growing your own vegetables can be a great way to cut costs, but it’s important to do some research first. Consider what will be easy to grow and what will be the most cost-effective, as well as how much space you have.

Tomatoes and potatoes can easily be grown in pots or bags on balconies, for example. But if you have a larger outdoor space, you could look into growing beans, courgettes or salad leaves.

You can pick up salad leaf seeds fairly cheaply (around 89p to £2.99 a pack) and these should give you a crop for several months.

Review non-essential expenses

It’s important to regularly go through your bank statements to make sure you’re not paying for something you no longer need. A regular review of all you non-essential expenses can also be a good reminder of how much you’re spending where.

Streaming services

There are a variety of streaming services available these days. Netflix, Amazon Prime, NOW, Apple TV Plus and Disney Plus are just some of them.

But streaming services don’t come cheap. Netflix’s standard package with adverts costs £4.99 a month (£10.99 without ads), while Amazon Prime and Apple TV Plus both cost £8.99 a month.

Consider whether they still offer you value for money (how much content do you watch, for instance?) or whether you could ditch them. You might even discover that you signed up for a free trial and have since forgotten to cancel it.

Gym memberships

If you’re paying for a gym membership, think about whether you use it enough to make the monthly cost of around £40 worth it. There are plenty of ways to stay fit for a lot less. Pay-as-you-go gyms are one option, but there are also numerous free fitness videos to try out on YouTube. Many local parks have free-to-use ‘green gyms’.

If you want to cancel your gym membership, check whether you’re tied into a contract for any length of time (perhaps 12 months). If you are, you might need to wait until that period has passed before you can leave.

Impulse purchases

Online shopping has made it much easier to impulse buy. So, before making an impulse purchase, ask yourself whether you can afford it and whether it’s something you need.

Then give yourself a 24-cooling off period. This gives you time to reconsider the purchase and decide whether it’s something you can do without.

Smoking

Smoking kills saving. The average price of a packet of 20 cigarettes in January 2024 was £15.26, according to the Office for National Statistics. If you get through two packets a week, this would cost you around £122 a month or £1,587 a year.

Now could be the time to start taking steps to quit smoking and give your health and your bank balance a boost. There’s lots of support available on the NHS website.

Drinking

Drinking alcohol can also absorb a lot of your budget. Figures from UK Debt Expert found that the average person drinking six pints of lager a week could save around £130 a month if they gave it up. Anyone drinking six large glasses of wine a week could save £142.

Even if you don’t give up the booze completely, you’ll still make decent savings by cutting down.

Financial fees

There’s a whole host of fees to watch out for in the world of personal finance and cutting those out can help you save money. Many of these financial fees can be avoided if you’re careful.

ATMs

If you need to withdraw cash, check whether the ATM you’re using charges a fee. It should warn you on the screen before you make a transaction. Most UK ATMs now offer fee-free transactions but you could be charged if you use one abroad.

Also check whether your debit or credit card charges a fee for cash withdrawals. You should be able to find this in your provider’s terms and conditions, either in the details you were sent with the card or on the provider’s website. Alternatively, give your provider a call. Fees can be around 2.75%, but again, they are more likely to apply when you use your card overseas.

Keep in mind that if you use a credit card for cash withdrawals, you’ll also be charged interest from the date of the transaction. This applies even if you pay off your balance in full that month. As interest rates can be as high as 30% APR, avoid cash withdrawals on credit cards.

Banking services

Some bank accounts charge fees for certain transactions. As well as the fees mentioned above, fees could apply for:

• Managing your account
• CHAPS payments (same-day payment between banks)
• Debit card replacement
• Sending money outside the UK
• Receiving money from outside the UK

MoneyHelper has a useful tool to help you compare bank accounts and their fees. This could help you understand how much your bank account charges for what and potentially help you find a cheaper option to switch to, saving you money.

Late payments

Making your repayments on time is a key part of good debt management. If you’re late making a payment, you will likely be charged a late payment fee of around £12. This will also be recorded on your credit file and could negatively affect your credit score.

Setting up a monthly direct debit will help ensure you never miss a repayment on your credit card, mortgage or loan can actually save you money.

Travel

The rising cost of living has also led to more expensive travel costs. Here are some ways to keep those costs down.

Fuel prices

You can use tools such as PetrolPrices.com to find the cheapest filling stations in your area and how far you need to travel to get there.

If you’re travelling to the same place of work as someone who lives local to you, you could also think about car sharing and splitting fuel costs. You could both save money.

Advance planning

You’ll often save money on flights and train tickets if you plan ahead and book in advance. If you’re booking a train journey, for instance, it’s usually best to book about 12 weeks in advance. The longer you leave it, the more expensive it tends to get.

For example, booking a single fare from London Euston to Manchester Piccadilly would cost £71 on the day on Trainline. Yet it would only cost £28 when booked 12 weeks in advance.

Indirect flights

Although direct flights are more convenient, you could save a tidy sum of cash by taking a slight detour and choosing an indirect flight. It might only add a few hours to your total travel time too.

For example:

• Flying direct from London to Bangkok costs from £979. The total journey time is 11 hours, 25 minutes.
• If you add a stopover in Kuwait, the price drops to £608 with a total journey time of 17 hours, 15 minutes.
• If you add a longer stopover in Beijing, the price drops to £479. The total journey time is 23 hours, 30 minutes.

Source: Skyscanner

Housesitting in lieu of hotels

Rather than forking out for expensive hotels while you’re on holiday, have you ever thought about housesitting as a way of saving money? The idea is that you look after someone else’s home while they are away and in return, you get free accommodation. You will usually be required to carry out tasks such as watering the garden or even looking after pets.

Take a look at websites such as Trusted Housesitters and Normador to get started. These sites will match those looking to housesit with those looking for a housesitter. Destinations are across the globe.

The downside is that you will need to pay a membership fee. Plans start from £99 a year with Trusted Housesitters and from €79 a year with Normador.

Additional money-saving resources

If you’re looking for even more ways to save money, check out the following money-saving resources:

Websites

Useful websites include:

• Mysupermarketcompare.co.uk: This lets you compare prices across the major supermarkets.
• LatestDeals.co.uk: Shows you the top offers across food, drink, fashion, books, health and beauty.
• Quidco and TopCashback: Offer cashback when you shop online at certain retailers.
• HotUKDeals: Highlights the top deals available on just about anything.

Money-saving apps

You can use a range of budgeting software and money management apps to help you with your financial planning. Examples include:

1. Emma
2. Snoop
3. Plum
4. Chip

Government help

MoneyHelper is a government-backed site that offers free and impartial guidance to help you better manage your money. It’s also worth using the gov.uk website to make sure you’re getting the tax credits and deductions you’re entitled to.

You can also use our benefits calculator to make sure you’re claiming everything you’re eligible for.

Summary

There are many different ways to save money and give your bank balance a lift. Even the smallest saving could help you to make more of your money and set you up for a better financial future. So why not get started today?