Whether it’s one of your New Year’s resolutions or just something you’ve been meaning to do for a while, starting to save money is an exciting and empowering feeling!
If you’ve made it to the end of January but still find yourself struggling to get started properly, it’s worth noting that you’re not alone: research shows the 19th of February being the date that most British people give up on their resolutions .
Without some sort of strategy in place, therefore, it can quickly become a demotivating, daunting and disheartening feeling, too.
Thankfully, using a saving technique means it doesn’t have to feel that way.
As with most things in life, there isn’t a one-size-fits-all solution for saving, with different techniques working for different people based on their individual needs and financial circumstances.
Before deciding which one suits you best though, it’s important to get an overarching understanding of your incomings and outgoings.
It might seem obvious, but it’s worth reiterating that you should be aiming to spend less money than you earn, as having regular expenses that exceed your income could put you in debt. And, with that in mind, set aside some time to figure out just how much is paid in – salary, interest, pensions etc. – versus how much is paid out.
Once you know where your money is coming from and where it’s going, you can then start to put a monthly budget together.
A well-planned budget should earmark money for regular costs like your rent or mortgage, bills, insurance, food, and subscriptions, as well as giving you an allowance for things you enjoy such as the cinema, eating out, or days out. To provide an additional safety net, it’s also worth setting some money aside for an emergency fund.
Now all that’s left to do is choose your preferred technique from the list below — and start getting your save on for the rest of 2023!
1. The 50/30/20 Budget Rule
If you think you’ve heard of this method before, chances are you have because it’s a really popular one — and with good reason!
The premise is simple.
On payday, split your after-tax income into three separate categories: 50% covers your needs, 30% your wants, with the remaining 20% going into savings or paying off debt.
To make the most of this strategy, you’ll first need to differentiate between your wants (think eating out and subscription services) and needs (the things you cannot live without, like bills and food shopping). Using recent bank statements to categorise spending and establish the total of your wants, you can then look at ways of cutting down on those costs to stay within the 30% bracket and, in turn, hit your 20% savings target.
For example, could you change those weekly takeaways to fakeaways, then pocket the difference? Or how about shedding some pounds off your monthly outgoings, too, by swapping that gym membership for doing weights at home?
Once you’ve made those changes, gotten to grips with and adjusted your spending accordingly, you’ll know exactly where you stand every month — and be able to get your save on in no time at all!
2. The 52-Week Saving Challenge
Looking for an easy yet effective way of creating savings, good practice, and financial confidence?
Then look no further than this 12-month plan.
Simply pick a starting date, then put away £1 in Week 1, before increasing the amount you save every week by £1 — ending with £52 in Week 52.
By the end, you’ll have saved a total of £1378 using this technique, making it perfect for those who want to save for something particular within a designated timeframe. Another big advantage to this method lies in the fact that it can be easily tweaked; if you want to save more, for example, you can change your weekly amount to £2.
For more seasoned savers, the 52-week challenge is also a great tool to use alongside other methods, as it provides a straightforward way of bolstering your end-of-year total.
3. Paying Yourself First
For those wanting to build more towards their long-term future, getting into the habit of paying yourself first could be the way to go.
As the name suggests, the idea here is – before even paying any bills and other outgoings – to immediately tuck some payday money away into a savings or . However, it’s important to remember that with investing, your capital is at risk, meaning you could get back less than what you invested.
A great way of making sure this is done automatically is to set up a standing order; as well taking the hassle out of having to do it manually every month, it also takes the temptation out of having the money sat in your primary account to spend on other things.
Even though it’s generally good practice to put as much aside as you can, that figure is entirely up to you (and doesn’t even have to be the same every month). After all, the emphasis is more on creating small-and-steady growth through consistent saving which, in turn, could help you create a nice little nest egg, hit one of your shorter-term financial targets, or bolster an emergency fund.
Regardless of how much you choose to save each month, paying yourself first is a great way to stay prioritised, motivated, and avoid overspending.
4. Cash Stuffing
Last but by no means least, we have to mention the viral TikTok sensation that is cash stuffing!
In an increasingly digital financial world, it’s been interesting to see a traditional, back-to-basics budgeting method (that’s been around for decades, no less) resonate so much.
Based on a concept developed in the 1970s called zero-based budgeting – where all expenses must be justified and approved for each new period – cash stuffing involves physically withdrawing and ‘stuffing’ cash into separate envelopes for all your different spending categories.
Again, you’ll need to have a solid idea of your budgets for each category before starting, but let’s say you’ve stuffed £200 into a food and groceries envelope for the month ahead. When it comes to doing your weekly shop, you simply open that envelope and take the cash out, before putting what you don’t spend – or any change – back in.
For security and interest reasons, some people might not feel comfortable with having their cash physically withdrawn, but if you are looking for a more tangible way of seeing just how much you’re spending on different categories, then this could be the 2023 budgeting method for you.
Wealthify does not provide financial advice. Please seek financial advice if you are unsure about investing.
Please remember the value of your investments can go down as well as up, and you could get back less than invested.