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In April 2017, we decided to do something about our rather sad looking financial situation, and our even sadder looking financial future. Being a low-income household, we had to start small. This is where we began...
1. Budget Round-Up
You write your budget, you see how much you have left, and you plan to save it, but it's so hard to get started. Savings do seem to be rather like an avalanche—once started, the momentum just keeps gathering. But what if you can't break your habits enough to get started, or you just don't know where to start?
Open an online savings account, preferably linked to your bank account just for ease of use. Re-write your budget, but round up all your bills and payments. If you only have a few pounds a month spare, round your bills to the nearest pound (or dollar, or whatever your currency is. I'm in the UK, so I'll be using pounds sterling; just sub in your own—the principle is the same). If you have a nice chunk of "spare" money, round to the nearest five, or even ten. Then, when those payments come out, transfer the rest of the money to your savings.
E.g., my monthly water rates bill is £24.36. I budget £25, and transfer 64p to my savings.
It doesn't sound like much, but across all your monthly commitments, it will soon start to add up!
2. Budget Slashing
"If you always do what you've always done, you'll always get what you've always got."
So, what can you do differently to bring change?
Look at your spending. If you can drop £5 a month from four things, that's £240 a year! There are plenty of ways to enjoy life without spending all your money. Instead of a night out with friends, spending money you know you shouldn't, host a movie night at your place: everyone brings a favourite film, a bottle of wine, and a snack to share. Be creative, and find new ways of entertaining yourself and your family. Apply that attitude across the whole of your spending, and you'll be amazed at how much you can save!
3. Account Skimming
This is dead simple. If getting up close and personal with your spending is a bit daunting at first (and don't worry, it is for a lot of people!), try doing this first. It's easy, low-involvement, and a quick habit to form.
Pick a point in the day where you know you can have a couple of minutes undisturbed. (For me it's last thing at night when everyone else is asleep.) Log into your bank account, check the balance, and transfer any "spare change" to your savings account. If you're on a low-income, or have a high percentage of your income already taken by monthly commitments, just transfer the pence. If you're not quite so hard pressed, round it down to the nearest five or ten. I started with the pence, but was quickly able to step this up to adding in an extra pound here and there.
If you start with this one, you'll be surprised at how quickly a few pence a day can stack up. It's very motivational!
4. Service Switch-Up
It's a nice feeling, having everything ticking along all by itself with no mental effort required from you. But that lack of input could be costing you hundreds of pounds a year.
However, rather than the somewhat Herculean task of tackling all your providers in one go, pick the most expensive and see what you can do. Start by checking you aren't overpaying that provider; if it's a utility, is there a cheaper tariff you can switch to? If it's your TV package, are you paying for channels you don't use? If no savings can be made where you are, have a good look online to see if there's a cheaper service you can switch to. It may take a few hours, but it can reap substantial rewards. And don't forget the power of playing companies against each other. If you can save £10 a month by switching, let your current provider know you're thinking of doing so. You may find they offer you an even better deal to keep you!
5. Be a bore!
Not really! Well...maybe a little...
In order to be in control, you have to take control; and you can't take control until you know what's going on! This is where the buck stops with you. Check your account every single day. For a month. It's easy to lose track of what's coming and going, but it's actually just as easy to get back on track. You can't budget without knowing how much you pay for things and where your money goes. So find out. Make a list of every transaction, incoming and outgoing, and you'll build up a clear picture of what's going on.
Don't recognise something? Chase it up. Didn't realise you were still paying that magazine subscription you thought you cancelled when you moved house a year ago? Cancel it!
At the end of the month, you will feel less out of control. Hopefully enough to tackle one of the other points I've outlined. If not, just take another month to track everything. The best way forward for your personal situation will become clearer once you can see what the situation is!
Good luck. It's not necessarily going to be easy, but it will be worth it. I promise.