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How to save if you can't stick to a budget

Does the mere thought of budgeting make you shudder? Find out how to save money, without putting yourself into a financial straightjacket.

07 September 2018Andre Spiteri 3 min read

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Does the mere thought of budgeting make you shudder? Find out how to save money, without putting yourself into a financial straightjacket.

For many of us, sticking to a budget is easier said than done. According to a recent survey, 53% of Brits regularly spend more than they can afford. And, more worryingly, one in four of us doesn’t manage to save any money at all.

As it happens, while budgeting can make a big difference, it’s not the only way to help you reach your savings goals. So if spreadsheets, spending limits and iron discipline make your heart sink, here are some simple hacks you can try to help you free up more money for your piggy bank with less stress.

Keeping track of your spending helps you understand where your money's going. It also uncovers any ‘bad’ habits that could be making it harder for you to set money aside.

As humans, we’re wired to respond to visual information. So, seeing how much you’ve spent on Monster Munch and matcha lattes black on white can encourage you to make better decisions. Over time, you may even find you’re budgeting naturally, without forcing yourself to stick to arbitrary spending limits.

Thanks to open banking, tracking your spending has never been easier. Apps like Money Dashboard, Money Hub and Yolt connect to all your bank accounts and credit cards so you can see your spending in one place.

We’ve all been there. You’re at the supermarket till and your hand sneakily reaches for a Snickers bar. Or, you head to the high street for a shirt, only to return home with five new outfits.

The average Brit spends £144,000 over their lifetime — approximately £200 a month — on purchases they’ll later regret. That’s money you could’ve spent on things you care about. Or saved for a dream holiday, a property deposit or your retirement.

So how can you avoid frittering money away on impulse?

Here are a few tips:

Always write up a shopping list

A study on shopping psychology found it’s easier to give in to impulse buys if you hit the shops without a plan. Writing up a list forces you to think about what you really need, making it less likely that you’ll overspend.

Ditch your plastic and pay for your daily needs in cash

Paying in cash activates your brain’s pain receptors. So, paying for your day-to-day purchases the old school way can help you get in the habit of thinking twice before you buy.

Shop online

Recent research found that online shoppers make fewer impulse buys. That said, do watch out for shipping fees, as they can quickly add up.

While reining in your spending can free up more money, there’s only so much you can realistically afford to set aside each month. So, what you do with your savings is just as important as saving in the first place.

As a rule you should keep about six months’ worth of expenses somewhere easily accessible, such as a current account or easy-access savings account. This way, you can get to it quickly should you need to pay for an unexpected expense such as a broken boiler or an issue with your car.

But when it comes to saving for long-term goals such as retirement, you can grow your savings much more if you invest them. This is because of something called compound interest.

In compound interest, you earn interest not just on the money you save, but also on the interest you’ve already earned.

Let’s say you save £100 in an account that pays 1% interest a year. In the first year, you’d earn £10. In compound interest, this amount is added to your original £100. So, in the second year, you’d earn £11 (1% of £110). In 10 years’ time, your original £100 would’ve more than doubled to £259.45. All without you adding a single penny to the original sum.

Of course, investing also has its risks, so you need to tread carefully. Here’s our beginner’s guide to investing to start you off.

Ultimately, saving is about freedom. Freedom to travel somewhere you’ve always dreamed of visiting. Freedom to buy that house you really like. Freedom to enjoy your retirement without having to worry about money.

The problem is that our brain tends to prefer instant gratification over long-term rewards. And this can make saving for the future harder than it has to be.

For this reason, it’s important to keep yourself motivated.

For starters, you should set savings goals. According to NS&I, people who have a goal save about £550 a year more than those who don’t.

More importantly, don’t be afraid to spend time visualising your goal. If the going gets tough, picture yourself holding the keys to your new flat, or retiring from work to sail around the world. And don’t forget to check in on your savings regularly to see them grow.

The more you’re in touch with why you’re setting money aside in the first place, the more motivated you’ll be to save.

Andre Spiteri Image

Written by Andre Spiteri

Financial Writer

Andre is a former lawyer turned award-winning finance writer.