A lot of people are quite shocked when they hear how much I save in comparison to what I spend. A lot of this is attributed to a big salary, but my expenses are still lower than most people that I know.
Saving so much is partly due to my upbringing, partly due to my relationship status and partly due to my competitive nature, but a lot of my savings can be attributed to certain habits that I have instilled in myself over the years. These are habits that anyone can reinforce in themselves to increase their savings rate.
How can you increase your savings rate? Check out my easy savings tips below.
Create a budget at the beginning of the year and stick to it
If you don’t have a budget you have no way of keeping your spending in check. You can’t accurately decide how much you can spend on the things that you really want to buy. It’s also much harder to tell if you’re over spending.
Creating a concise budget allows you to clearly see how much money you can dedicate to investments and how your hobbies will change your retirement date. You can then easily decide what to cut out, or even what to dedicate more money to.
I enjoy traveling, so I’ve purposely budgeted for more money to be spent on holidays over on the Saving Ninja Budget Planner. To help maintain my 80% savings rate, I’ve cut back on my other spending areas like eating out and buying luxury items.
With a budget, if my life circumstances change, I can easily jig the figures around. I can purposely take away from other optional spending categories and ensure that my savings rate will always stay at its rightful place, this way I know that my retirement date won’t be affected.
Give yourself a ‘Spending Pot’
Every month, give yourself a certain amount of money that you can spend on whatever you like. This can be spent guilt free and you can use it to save up for bigger purchases. Doing this allows you to set a monthly figure that you’re happy with spending instead of just buying what you want whenever something takes your fancy and potentially decimating your early retirement dreams.
I give myself £100 per month to spend on what I like. If I want to buy something worth £300, I’ll have to go without purchasing any new clothes or games for a few months to save up for it. Even though I could easily afford to spend £300 each month, doing this keeps my purchases in check. I know exactly how much I can invest and I can spend my money confidently (and guilt free!) knowing that it won’t affect my savings rate.
Create a ‘holding list’ for purchases
Your ‘holding list’ can be on paper or stored on a word editor. If you really want to buy something, instead of just getting it, put it on a holding list for 2 weeks. This way you can tell if you really want it or if it’s a passing fad. Most of the time your desire for the item will go away.
In the modern world, there are advertisements everywhere to get you to spend, spend, spend. Even the most avid saver can sometimes succumb to advertising’s strong influence.
Sometimes you’ll feel like you want something so much and that you won’t be happy unless you have it. You’ll then regret your purchase after you become bored of it in a couple of weeks. Creating a holding list can fix this problem.
Buy second hand, and sell again after you’re done
If you absolutely must buy those ‘luxury’ items, make sure you buy them second hand.
This is an especially good tip for games. I wanted a Nintendo Switch since it’s release date but I was adamant that I shouldn’t buy one as I already had lots of other consoles and games I hadn’t yet finished. After over a year of lusting after one, I eventually gave in. I bought the Switch second hand and also bought some games second hand. Switch games rarely fall in value, this allowed me to sell them for the same price (or sometimes a higher price) after I had completed them and then buy another one!
Buying second hand and selling again is a great way to combat your instant gratification monkey. Who says you can’t spend money when saving a lot? Just make sure you sell again when you’re done :]
Buy for longevity instead of cheapness
This seems counter-intuitive to the aspiring saver. Lots of people wrongly assume that they need to buy cheap to save more money, but the real trick is to buy for longevity. A £120 good quality coat that will last you 15 years is much better than one for £40 that will last you 1.
This is not to be confused with buying brands. Make sure that your extra money is going on quality and not a brand name. Do your research before hand and make sure you know what you’re buying.
Unsubscribe from retailers that constantly send you ‘sales’ promotions
A lot of websites and shops are in constant sales mode. They do this to psychologically trick you into spending more. Don’t fall victim to it, unsubscribe from their mailing list! You’ll be much better off only buying what you need.
When shopping on Amazon there is a good Chrome extension that you can add called Keepa , this app shows you the price history of each item you’re viewing. It also tells you what the average price is. Using this, you can easily tell if the seller has hiked the prices up on purpose just before a ‘sale’. This extension is a must around events like black friday!
Declutter your home
A lot of people end up buying multiples of the same item as they don’t realise they already own it. Keeping your house tidy and throwing away what you no longer need is a great way to better keep track of what you already own. It will also help throttle the need to buy more stuff when you realise how much you’re throwing away.
There is also evidence that suggests that living more minimally and clutter free allows you to think more clearly, be more productive and most importantly, live a happier life. An excellent book written about this topic is Marie Kondo’s ‘The Magic of Tidying,’ give this a read if you need some more inspiration!
Have you got any tips for increasing your savings rate? Let me know in the comments below.