Part of practicing good personal finance is reducing your outgoings as much as possible. Most families in the UK have an excessive amount of leakage in their personal finances. By simply taking a look at what they are spending, they could save hundreds of pounds every year.
Here are some tricks to help you reduce your outgoings.
Have a Goal in Mind
It is always good to reduce your outgoings and save money. However, there is little use in doing this unless you have some sort of goal in mind. You need motivation in order to cut your spending. Why would you stop spending on the little luxuries when you have no good reason to? There is little use in compromising your standard of living for money’s sake.
Think about what you would like to save for and keep this firmly in your mind. This will ensure that you stick to saving and never waver.
Know Your Spending
It is shocking how few people know how much they are spending every month and what they are spending that money on. Many families are left entirely in the dark as to the state of their finances. For one month, keep every receipt and keep diligent records of everything you are spending. This will give you a snapshot of exactly where your money is going.
You should be keeping permanent records anyway, if only just for yourself.
Once you have gathered together your files, create a spreadsheet and calculate your overall spending. You should divide your spending into the essentials and the luxuries. Categorizing your spending in this way will help you to make cuts at a glance.
Cut the Luxuries Before the Essentials
The first step to actually making cuts is to divide your luxuries and set them apart. These are the things that are not relevant to the running of your household. In theory, you could cut them all out of your life without compromising your ability to live.
It is not a recommended course of action because you want to live a good life that has room for something other than work and sleep. Most people find that in the list of luxuries they have items that are not really that important. For example, if you are spending money on a magazine subscription yet you barely get through the first page every month, this is a waste of money.
And you do not have to cut an entire luxury. For example, if you are spending £100 on taking the family out to the cinema a few times per month you could cut one of those visits. That way you still get to enjoy the cinema, while spending less on it. You can apply the same principle to practically any of the luxuries on your list.
Can You Do Anything about the Essentials?
Your essentials will include things like debt repayments, bills, and rent. You may think that there is nothing you can do about these, but this is not the case. You can make changes to these numbers simply through trying to renegotiate a better deal.
One trick to deal with the utility companies in the UK is to call them and tell them that you are thinking about leaving for another provider. Since this industry is so competitive, they will nearly always offer you a better deal. If you can speak to another provider and find a better deal, you can even use this as leverage to get a better rate from your current provider.
Another option for reducing your monthly bills is to lock in your rates. This means that your bills will not change for the next couple of years. In theory, this can work against you because if the rates go down the amount you pay will stay the same.
But if history has taught the country anything it is that utility bills will only go one way: up.
Dealing with Debt
Debt is never a good thing to have, particularly if it is not mortgage debt. The way to deal with debt is to consolidate it and then pay it off as soon as possible. The longer it exists, the longer it acts as a weight on your income. The interest alone is costing you hundreds of pounds every year.
In order to save, you should make paying your debts a priority. See if you can make a deal with your creditors to either consolidate the debt or to reduce the interest. Some lenders may be willing to budge if you promise to pay off the amount sooner, whereas others you may have to simply settle with.
By making debt your priority, you will ultimately save more in the long-term.
A Drastic Rental Step
If you are truly determined to save, you can take some more drastic steps. You may decide that instead of paying a significant amount in rent it is better for you and your family to move. In most cases, landlords will not negotiate the amount you pay in rent because it is relatively easy to find new tenants these days.
Instead, look at other homes that you could move into. Even moving a mile away from your current location can translate to hundreds of pounds saved in the course of a year, even though the two properties may be the same size.
Some families are going even further by moving to completely different parts of the country. You may want to look at this option, especially if you work remotely or your company is willing to transfer you to another branch.
Frugal Living is About Keeping Track
You can cut your luxuries, and you can reduce your bills, but this is not a one-time only option. To continue living frugally, you need to track your spending and continue to make changes in the long-term. You should be creating monthly spreadsheets to detail your spending and your progress.
Set up a separate saving account where you will save the difference every month. Over the course of a year, you will be amazed at how quickly your savings fund has grown.