Dread checking your bank balance at the end of the month? If you’re maxing out your money before payday, here’s how to be smarter with your salary…
Do you have to tighten your purse strings towards the end of the month? You’re not alone. According to findings from the Money Advice Service, a third of the working population (a whopping 10 million workers) struggle to make wages last until the next pay day. Where does the money go? Part of the problem lies in a postpayday spending spree, with 2019 data showing that almost a fifth of us spend more than half our salaries within 48 hours of receiving them, while further cash goes on the allimportant bills. Indeed, it seems we’ve forgotten how to save.
The recent pandemic served us as a reminder. Reports reveal that global spending dropped throughout the month of March – the Netherlands experienced a 24 percent decrease in debit card transactions, China saw reduced expenditure across travel, hairdressing, clothing and accessories, and Australia’s discretionary spending was 26 percent below normal levels. “We are now experiencing a real-life demonstration of just how saving small amounts adds up,” says Jessica Exton, behavioural scientist at ING (think.ing.com). “And it doesn’t necessarily need to revert once the epidemic is over.” If you want to make your money go further, follow the five-step plan below.
Your more money plan
In times of uncertainty, it’s particularly important to be wise with your wage. Our top money experts explain how to spend less, save more, and be ready for financial emergencies.
1. Set a budget
If you can’t work out where your cash is going, there’s a simple way to find out – do a budget. After writing down incomings and outgoings, most people are shocked to discover they’re overspending each month.
“Start with the largest outgoings and make a note of as much as possible, from your rent or mortgage, through to your shopping bill and how much you spend on coffee,” suggests Adrian Lowcock, head of personal investing at Willis Owen. “Once you have a budget in place, you should get an idea of how much you can afford to save.”
2. Purge your splurge
Now that you know what’s going in and out of your bank account, you can see how much you’re spending on non-essential items. “Make a note of what you think you could cut back on – spending on clothes, hairdressing, cinema trips, restaurants – while also ensuring you treat yourself on occasion,” advises Emma- Lou Montgomery, associate director for Fidelity International. “Take advantage of a money savings app that can help keep your finances on track – you will immediately become more aware of your spending habits.”
3. Switch and save
Monthly bills take a big chunk of our wages, but are you spending more than you should? “It’s important to ensure you’re on the best deals available to you,” says Richard Longmore, energy expert. “Research has shown that if you have been with the same provider for several years then it is likely you’re paying more than you should for your energy usage.” Visit hoppy.co.uk to compare all of the energy tariffs available to you, and switch to the cheapest utility, broadband, TV and mobile deals in the country. Data shows that this could create savings of up to £492 per year. Check your mortgage deal, too. “Set a reminder for when it expires and do your research a couple of months beforehand,” advises Adrian.
4. Plan for the future
You might have a manaña attitude towards saving but putting a plan in place can help to eliminate spur-of-the-moment purchases. “Having a long-term plan is empowering and helps you to take control of your finances,” agrees Zoe Bailey, director of financial planning at Tilney. “Create a plan that helps you to work out your future goals, whether that’s simply saving a little each month for a holiday, saving for a deposit, or even planning for your retirement.”
5. Move your money
Don’t leave spare money sitting in your account, tempting you into spending it. “If you have any money left over at the end of the month, transfer it into your savings account,” says Adrian. “Try to make your savings account slightly difficult to access so it takes a little effort to transfer money back to your instant access account.” Notice accounts require savers to provide notice when they want to make a withdrawal, which can be as long a period as 120 days – using one of these is likely to remove the temptation to impulsively spend your savings!