How to budget and save money

Saving money is usually the first step everyone learns when managing their finances. But sometimes you may feel like there’s more you can do. Perhaps you need some help saving for a holiday or a deposit for your first home? Whatever your situation may be, budgeting can be a useful tool to help you achieve your financial goals.

This article includes tips, suggestions and general information. We recommend that you always do your own research and consider getting independent tax, financial and legal advice before making any important decision.

Learning how to manage your money may seem overwhelming at first, especially in a world with a multitude of complex and varying financial tactics — but the benefits can be invaluable when you find the right gameplan.

With a simple budget, you can work to take control of your finances, review and prioritise your expenses, avoid overspending, and potentially even set money aside for savings.

This article explores the basics of personal budgeting and saving, plus offers some practical steps to consider to stay on track.

How to incorporate savings into your budget

Saving money can be difficult, especially if you’re on a tight budget. But with some creativity and determination, there are different ways you can help save money.

Consider the below steps:

1. Calculate your monthly net income. Do you know how much money you bring in every month after taxes? With this number in hand, you can start to build a realistic budget that includes savings.
2. Consider the 50/30/20 rule. If you’re creating a budget for the first time, the 50/30/20 rule suggests allocating your money into three categories: needs, wants, and savings. You would allocate 50% for your needs, such as housing, food, utilities, and transportation. You would then allocate 30% for your wants, such as entertainment, dining out, and travel. Finally, you would allocate the remaining 20% for savings, such as an emergency fund, retirement savings, or paying off debt.
3. Set a goal. To help you stay motivated, set a money goal to work towards, such as saving your first £5,000.
4. Avoid unnecessary spending. If you’re on a tight budget with little wiggle room for savings, consider looking for areas where you could potentially reduce your spending. For example, you could cancel subscription services you don't use or reduce the number of times you eat out each week. The money you gain here could then be put into savings instead. Utilising an expense tracker can be a great way to find those places where you have unwanted spending.
5. Start small. If you can’t dedicate 20% to savings, that’s OK. Start with a small amount instead — such as £10 per week and gradually increase as you're able.
6. Automate your savings. Consider setting up an automatic transfer from your current account to a savings account each month. This could help you save money without even thinking about it. And utilising a high-yield savings account could help you save and earn interest at the same time, making your money go further. Always consider potential fees and other associated costs that may come with these types of accounts.

How to stick to your budget

Sticking to a budget can be just as tough as creating one in the first place — but can be essential for reaching your long-term goals.

Consider these tips to help you stick with your budget:

• Break down your monthly budget into weekly buckets. Keep a closer eye on your monthly budget by breaking it down into weekly expense lists, so you know exactly how much you can spend each day.
• Use a budgeting app. There are many budgeting apps available that can help you track your expenses, set goals, and monitor your progress. Find one that works for you and use it consistently.
• Find accountability. Share your budgeting goals with a trusted friend or family member who can hold you accountable and provide support when you need it.
• Reduce impulse spending. Avoid impulse purchases by making a list before you go shopping and sticking to it. Consider waiting 24 hours before making a big purchase to ensure it's a necessary expense.
• Reward yourself. Set small rewards for yourself when you hit budgeting milestones. For example, you could treat yourself to a favourite meal or activity when you reach a savings goal.
• Learn from mistakes. If you overspend or go off-budget, don't get discouraged. Instead, learn from your mistakes and adjust your budget as needed.

Pointers for saving money

Stretch your money and make the most of what you have by considering these tips to save:

• Cook at home. Eating out can be expensive, so try cooking meals at home. Look for simple and affordable recipes online and consider meal planning to save time and money.
• Look for free activities. Instead of spending money on entertainment, look for free activities such as community events, free museums, or parks.
• Shop smart. Look for deals and discounts on groceries and household items. Shop at discount stores or buy generic brands to save money. Consider looking for deals or buying in bulk to save even more.
• Use a shopping extension. A shopping extension can help you find coupons, compare prices, save money, and sometimes get cash back while shopping online. You can get available promos and coupon codes automatically when using PayPal Honey.