Whether it’s a new car, a holiday or even a property purchase, if you’re saving up for something special, it’s certainly useful to have a strategy in place. The financial experts certainly agree, extolling the virtues of precision planning when trying to get on top of your finances.
For better or for worse, saving money and running a manageable budget is one of the main markers of adulthood and an indicator of a stable, sensible outlook. With such a budget in place, those bigger purchases feel less daunting.
Let’s tackle this thing together; here are 5 smart tactics for saving up money strategically.
CONSIDER HIDDEN COSTS CAREFULLY
The item you’re saving up for, more often than not, won’t simply come at face value.
Before you start thinking about how to achieve your financial goals, find out exactly what you’re saving up for. When you’re planning a holiday, for example, don’t simply factor in the cost of flights and accommodation. Consider the extra funds you’ll spend too, such as new clothes for your trip, activities and excursions while you’re there, and money to eat out. If it’s a car you’re after, then parking spaces, petrol and insurance should all take precedent.
Conversely, don’t rely on assumptions when it comes to how expensive you think things are. Check online before you pull out your credit card and you’ll be surprised at the deals and offers that are available. By finding the cheapest price, you’ll have an accurate idea of exactly how much you need to save.
SET MINI TARGETS
Some financial goals will take longer to achieve than others; that’s the nature of life and the oppressive economic system we live under. If you’re saving up to purchase a property or host a wedding, for example, it might take years before you reach your ultimate objective. It’s natural for your motivation to wane over time – and for your spending to oscillate between thrifty and frivolous in between – but setting mini targets will help you to keep on track.
Every time you hit a new target, give yourself a small reward; in doing so, you’ll have a regular incentive to work towards it. You don’t need to blow your budget in order to do this but be sure to recognise the hard work you’re putting in and reward yourself accordingly.
Many people swear by a simplified, monthly 10% savings rate as a general ballpark figure to aim for. You can set up a monthly direct debit from your primary bank account into a savings app, or take advantage of one of the many savings apps currently out there which can automate this process further for you.
USE A DEDICATED SAVING APP
Speaking of which…
You can use a pencil and piece of paper to create a workable budget, sure, and transfer that 10% out of your account as and when you see fit, but digital solutions are often a much more efficient way to manage your budget and savings.
With the right app, for example, you can create a viable budget and automatically link your spending to your profile to minimise the amount of work required to keep on top of your finances.
Budgeting apps are a great way to stay in control of your spending and get a deeper insight into your money management skills. As well as helping you to cleverly put money away for your next big purchase, they can also help you to enhance your saving skills and make savvier financial decisions.
Some of the best budgeting and saving apps currently on the market include Money Dashboard, Emma, Yolt, Bean and Plum.
GIVE YOUR EXPENDITURE AN AUDIT
If you want to increase the amount you’re setting aside every month, take another look at your budget and see whether there is any unnecessary expenditure you can cut. If you have active subscriptions or memberships that you no longer use, for example, cancelling them is an easy way to reduce your budget and increase the amount you’re able to save.
In fact, in March 2021, it was estimated that Brits had wasted £300 million on unused subscriptions and hobbies in the previous year.
Similarly, switching to a new cell phone or utility provider can save you a surprising amount while scouring the market for the cheapest insurance is another way to cut costs. You don’t have to give up all your luxuries in order to increase your savings, especially when you cut costs that you won’t even notice.
PAY DOWN YOUR DEBTS FIRST
Ouch. If you’re trying to save up for something, paying off your credit card or personal loan may not feel like your top priority. In fact, it’s an aspect of your outgoings usually confined to the footer.
However, paying down your debts is one of the best ways to save money and could substantially contribute to your bank balance in the long term. Paying interest on loans and credit cards is a simple waste of money, and the faster you pay off your debts, the less interest you pay. This will also help you to establish a better credit rating, which, in the long run, contributes to a more stable, sensible state of finances for many years to come.
Some experts recommend using the ‘snowball method’, a strategy popularised by financial expert Dave Ramsey, to pay down your debts most efficiently. Check out Investopedia’s guide to the debt snowball method (as well as the debt avalanche method) for a detailed breakdown of what this tactic entails.
THE BOTTOM LINE
Learning how to manage our money is an important life skill, but it’s not one that we’re taught in school. By remaining open to new budgeting techniques and finding out how to consolidate your expenses, you’ll be surprised at how easily and quickly you can boost your savings and reach your financial goals.