5 Money Saving Strategies for 2023 (Save Money Fast)
The best money saving strategies to save money fast and build financial resilience
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The beginning of the year is the ideal time to reflect on what your money saving strategies are and how to achieve your savings goals. As we face an ongoing recession and cost of living crisis, we should all think about how to save money fast, and save enough money to protect us from economic hardships.
Here are 5 money saving strategies for you to consider to get yourself through this year and build a financially resilient lifestyle.
This is a fundamental step for any individual or household, especially if you’re not quite sure about how much you are able to set aside each month, and if you don’t know what a reasonable saving goal is.
Creating a budget is very easy, probably much easier than what you imagine. I’ll break it down for you.
a) Make a note of your monthly net income.
This is very easy if you are employed: your net income is whatever you are paid by your employer on pay day. That amount is already net of taxes, and it’s all yours to spend.
If you are a freelancer, this might be a trickier step for a few reasons. First of all, freelance income tends to fluctuate quite a lot across the year: one month you may be making very much, while the next nothing at all. Furthermore, your income as a freelancer is gross, so you will need to factor in your taxes before you can work out your net income.
This is what I’d suggest if you are a freelancer:
Based on your current contracts and historic income trends, try to estimate an average monthly gross income for 2023.
From the gross average monthly income, take away 20% to estimate your net income. It isn’t a perfect calculation, but it serves the purpose of reasonably guessing your earnings and building your budget.
b) Make a list of your fixed expenses.
These are those outgoings that are the same every month. For example: rent, phone bill, internet bill, subscriptions.
Make a note of all of these, along with their monthly cost. What is left when you take away fixed costs from your income is what you’ll use to budget your savings and variable expenses.
c) Budget your variable expenses
This is where the true budgeting happens: you now get to decide how you’ll spend what’s left after you’ve paid your fixed expenses. Summarise your variable expenses in a few categories (for example: groceries, travel, health, household items, savings, etc) and give each one of them a budgeted amount for the month.
You can read plenty more about how I track expenditure every month by using a Kakeibo-inspired method that I created, which helped me save for my motorhome in 2022.
Save first, spend after
I can guarantee that this is one of the most effective money saving strategies you can adopt right now.
What most people tend to do when they receive their monthly income is to spend it over the next 30 days, and then transfer whatever is left, if anything, to their savings pot. This is a poor saving technique, as saving money isn’t prioritised at all, and you are not incentivised to spend less.
If this is what you’re currently doing, my advice to you is to flip it around: as soon as you receive your income, immediately set aside a your monthly savings goal, and use whatever is left for your monthly spend.
This saving strategy flips the priorities around, ensuring that your monthly savings are set aside before you can dip into them. It is a great way to avoid overspending and impulse buying and ensure your saving goals are met month on month.
Automate your savings
In order to not be tempted to spend your disposable income before you have the chance to save any of it, I highly recommend to automate your savings as a saving strategy.
This can be done in a few different ways:
a) Set up a Standing Order from your current account into your savings account.
It should be very simple to do so: you should log on to your online banking account, and set up a regular payment into the savings account of your choosing.
I’ve been using Plum since 2019 and have been absolutely loving it. I love it so much I always recommend it to all of my clients who have a harder time saving money.
Plum connects to your bank account, and thanks to a clever algorithm, it is able to calculate how much money you can afford to save every week, and automatically transfers it into a pot of your choice.
You can choose for your money to go into a savings pot, or an investment pot, or a pension pot of your choice. You can do plenty of other things, such as setting up a standing order from your current account into your Plum account (on top of what Plum automatically takes), and decide how each one of your savings should be split among savings, investments, and pension contributions.
I highly recommend downloading Plum on your phone and using it to automate your savings stress-free.
Prioritise repaying debt
There are not many things that grind my gears more than having to pay interest, but alas, we live in a society that basically coerces you into getting into debt, unless you are lucky enough to have the means to make big purchases in cash.
If you are in debt, maybe Credit Card debt, or a car loan, you are also paying for the cost of that debt, which is the interest rate on the money you borrowed. The earlier you can repay that debt, the less interest you will have to pay on any outstanding monies you owe back. As you think about how to save money, repaying your debt should be very high in your priority list.
There are a number of theories out there on what the best debt repayment strategy is. Here are a couple of examples.
Debt Snowball method
Some finance gurus are adamant that starting with repaying the debt with the smallest balance is the best way forwards. This allows you to gain momentum and motivation from extinguishing a small debt, and then the next, and then the next. This is called the debt snowball method: you make minimum payments on all your debts, and anything left of your savings goes towards paying the debt with the lowest balance, regardless of interest rate.
However, I am not a fan of this strategy: although I agree that ticking things off a list does put you in a more positive mindset, it does also mean that you will end up paying more, as you are not taking interest rates into consideration. So, by the time you extinguish your debts, you may have accrued and paid for a lot more interest than what you would have if you prioritised paying the more expensive debts.
Debt Avalanche method
The alternative of the debt snowball method is called the debt avalanche method: according to this strategy, you make minimum payments into all debt pots, and anything left you pay towards the debt with the highest interest rate. Although this approach means that it will take you more time to pay off all your debts, it also means that you will pay less overall, as you will have extinguished the more expensive debts first.
Here is a fantastic video that will show you the differences between these two methods:
Whatever strategy you choose for yourself, extinguishing your debts should be your first big milestone towards improving your financial health.
Avoid lifestyle inflation to save money
It sounds absurd, but people who earn ten times more than the average median salary are just as likely to live paycheck to paycheck as we peasants are!
Turns out, earning a lot of cash doesn’t make you automatically financially stable: you always need to make sure that your expenditure stays in check and that it doesn’t inflate along with your earnings.
For example: say that I have lived on a £2,000 net salary for a few years, and have devised a budget that allows me to cover all my needs and even save a little bit every month. If I switch jobs and earn +£1000 net per month, it can be very tempting to treat myself to some luxuries that I didn’t have the cash for before. Maybe I get my hair dyed, and gel nails, and move to a bigger flat. Soon enough, I’ll realise that despite earning 50% more than I did before, I have less left at the end of the month than I did before. Where did all my extra money go?
Well, I dyed my hair, so now I have to get it touched up every month or so, otherwise my roots will show. And my gel nails have to be redone every couple weeks. And my new flat costs £200 more per month, and it’s too big for me to clean it myself and I ended up hiring a cleaner once a fortnight, and it takes so much more to heat up so my bills are through the roof.
You get where this is going: be careful about all the true cost of every lifestyle change you choose for yourself, and ask yourself if these luxuries are really worth putting more stress on your financial goals. After all, up to some time ago, you were doing just fine with less money, and your flat is just fine as it is. If you manage to save and invest that extra £1,000 per month, you might have accrued over £8k of interest over 5 years.
Conclusions on money saving strategies
As you think of your saving goals, these are my main takeaways for you to reflect on:
Prioritise savings by transferring your monthly savings target into a savings account on your payday
Build and maintain a budget to track how you are doing and how much money you saved every month
Pay off your debt as soon as you can
Keep your expenses in check no matter how much your earnings may grow.
The best money saving strategies to save money fast and build financial resilience
About the author : Susie Italiano
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