Rebekah MayIs 2021 the year you finally want to save money? Great! Here we’ve listed four reasons why saving money is a good idea, and shared our top tips on getting started. From dropping the excuses, to creating a solid plan, you’ll soon see that saving money isn’t as difficult as it might seem.
Why You Should Save Money:
There are lots of reasons why you should save money. Here are four reasons we think saving money is so important.
- Financial Freedom: While it might initially feel like saving money each month is stopping you from enjoying certain things in life, having a sum of money saved up can actually lead to more freedom and enjoyment. Having money saved up means you can take that holiday, leave a job you don’t like, and spend time pursuing a career that you love.
- Long Term Security: Saving money is also important because it gives you a greater level of financial security. No one can predict the future, and having money saved up gives us a safety net in the event of job loss, pay cuts, and unexpectedly large bills.
- Reduce Financial Stress: This echoes the previous point, but having money saved also goes a long way to reducing any financial stress. You can sleep at night knowing that you can access spare money at a moment’s notice if needed.
- Improves Your Overall Financial Position: If you don’t have access to excess money and your car breaks, or you need a new fridge, then it’s likely that you will have to borrow money. Getting a loan isn’t always a bad idea, but generally borrowing money ends up costing you more in the long run. Having money saved up therefore means you do not need to rely on loans and can help you avoid getting into any costly debt.
As well as more freedom, greater security, and less stress, saving money is also important because it helps you feel more confident and in control of your money. If you want to start saving money today, follow the 5 steps listed below.
How To Save Money:
1. Leave The Excuses Behind
When it comes to saving money, getting started is often the hardest part. We convince ourselves that there are tonnes of reasons why we haven’t been able to save in the past. We might say that we don’t earn enough, that there’s no point in saving money while we’re young, or that we have credit cards and overdrafts that we can use. But in reality, the truth is that pretty much everyone can start saving, and the younger you start the better.
If you’re someone that believes they don’t earn enough to save money, then remember that you don’t need to stash away huge amounts of money each month. Get started by opening a separate savings account. Create an automatic transfer that moves £10 from your current account into a savings account. Either every week, or every month. If you find that you’re not missing that money, increase how much you transfer. Without much effort you’ll find that you’ve accumulated a decent sum of money in no time.
Spending your money while you’re young is also not a bad thing. It’s your money and we’re not here to tell you how to spend it – but, it can be a good idea to reframe the idea of spending vs saving. Spending all your money each payday on miscellaneous items is fun, but saving the money for something you truly want to buy might be better.
Getting into the habit of saving little and often when you’re young also creates good financial habits for the future. If you create a solid payday routine now that involves saving a portion of your salary each month, you’ll find that saving money is no longer a hassle – it’s just a normal part of life.
2. Think Of Your “Why”
When it comes to saving, it can be motivating to think of your reasons for saving. Your reasons could be similar to the points mentioned above – financial freedom, long term security, reduction in stress. Or they could be more specific – perhaps you want to buy a new car or your first house.
Identifying why you want to save can also help you identify the amount of money you need to save, and when you need to save it by. Research how much money you need to save and use this information to set both short and long-term financial goals.
Write these goals down and refer back to them every once in a while. Track your progress and assess if there are any adjustments you need to make in order to reach those goals.
Setting goals can really help you create new behaviours – they give you focus and something to work towards, and in some ways, it is one of the most important steps in how to save money.
3. Create An Action Plan
Now you know what you’re saving for, you can begin to think about how you’re going to save it. If you have a financial target in mind, calculate how much money you need to save each month in order to achieve your goal by a set time.
For example, if you want to save £500 by the end of 2021 you’ll need to save £42 a month.
If you have a budget, make sure you adjust it to reflect the amount of money you’re now going to add to your savings. This will probably mean that you’ll need to reduce the amount of money you’re spending in other areas. If you don’t have a budget, spend some time creating one.
Putting the money into your savings account as soon as you’ve been paid can also help. You could start thinking about savings in the same way you think about paying your bills – it becomes a necessity. Automating your savings so that the money automatically comes out of your account can also be a good idea.
4. Find New Ways To Save Money
If you want to supercharge how much money you’re able to save each month you could also find new ways to save money. There are lots of little ways you can cut costs. Any money you save here can go straight into your savings pot!
You could start by reviewing each of your bills. If you haven’t reviewed your bills in the last year, you might find that you could save huge amounts of money by switching to another plan. Switching energy, broadband, and phone plans is luckily very easy. Find out how Emma can help you switch plans here.
You could even save money by reviewing which subscriptions you’re paying for. Assess whether you still need to be paying for services like Netflix, Spotify, and Xbox each month. Canceling any subscriptions that you no longer need is a super-easy way to save money. Find out how Emma can help you spot unwanted subscriptions here.
There are even ways you can save money on your everyday spending. Before you buy an item, consider whether you’re getting it for the best price. Most retailers across fashion, food, beauty, home, and entertainment will offer cashback deals that reduce prices, in some cases by up to 10%! Check the Emma app to see all the different brands you can get cashback with.
5. Look For Ways You Can Increase Your Income
If your current salary doesn’t leave enough leeway for you to save, consider if there are any other ways you can increase your income.
Selling any unwanted personal items on sites like eBay and Depop is a great way to bring in some extra cash for little effort.
Another way you can earn some extra money each month is to start a small business. You could sell handmade goods, freelance on Fiverr, tutor over skype, start a blog, walk dogs, become a nanny – the list goes on!
In the UK you can earn up to £1,000 a year in extra income tax-free. You only need to let the taxman know about your side hustle if you’re making more than this. To do this you’ll need to register for self-assessment and let HMRC know.
Summary:
Here are our top tips for saving money. We hope that these tips will help you begin to put money aside for a rainy day. After all, you owe it to yourself to start saving money today.
Once you’ve got into the swing of saving money, and you have a nice amount saved, you could then consider starting to invest. Investing your money has historically seen better returns than savings accounts, meaning your money will make you more money. With interest rates on savings accounts so low at the moment, investing your money could be a good option.
For more information on investing, check out our guide to investing on the Emma blog, or chat with other people interested in investing in the Emma Community.
