With a fresh new year comes a new opportunity to introduce positive changes into our lives.
I love to spend some time in January thinking about areas we can improve on, and the area I'm most keen to focus on this year is our finances.
One positive thing that came out of last year for us was that, against all odds, our businesses didn't take a financial hit and we were able to keep our income consistent. Coupled with the inability to travel or go, well, anywhere really! - this meant that we were able to contribute a significant amount to our savings account. Something that we'd never really managed to do before.
We managed to go the point of saving enough money to be able to afford a down payment on a mortgage - something I honestly never thought we'd be able to manage. I've been using the Mortgage Calculator at https://www.mortgagecalculators.info/calc-uk.php to get some insight on how much our monthly repayments might be and what would be affordable for us - it's a really easy to use tool, and I found the information they have on applying for mortgages very useful too. Unfortunately there are other factors still standing in our way, the biggest one being my health and our housing needs which are keeping the home we need out of our reach for the time being - but we're still closer to being able to move out of the private rent trap than we have ever been before, so I'm remaining optimistic. We've been reading up on Help To Buy schemes as a potential route to home ownership too.
We'd like to continue to build our savings this year, and try a bit harder to rein in our spending as we have a tendency to be quite frivolous at times. I need to find a balance between "Living in the moment" and "throwing caution to the wind!".
So here's my advice for those looking to save more and spend less in 2021...advice I'm going to be following myself!
Write Your Outgoings Down
This is the most important part of the process, so if you only do one thing - make it this.
It's impossible to know how to budget your money without truly knowing what your outgoings are each month.
It can be easy to think only in terms of your rent/mortgage payments and utility bills but when you get thorough and list ALL of your monthly spends, it can be pretty surprising!
Because the kids usual club memberships are on hold due to the pandemic, I've been subscribing to lots of educational boxes by post and also lots more apps than usual - when you look at them individually they don't seem too expensive. £10 here, £12 there...but I was quite surprised when I did the maths to realize that we're now spending £100 per month on these things.
I'm also spending an additional £37.00 per month on online memberships and subscriptions for myself.
Seeing all of these moments written down and totalled up has helped me to realize that the combined monthly outgoings on these things is just too much for the value we're getting from them, and so I'm going to be making some changes. I've already cancelled two subscriptions that we hadn't even logged in to for the last 6 months - saving us £25.00 per month already.
Utilise Budgeting & Savings Apps
Half way through last year, I decided to sign up to the savings app Plum. I found it really handy as it links directly to your bank account, and squirrels away small amounts of money regularly - so small that I never even notice that they're missing. A few pounds here and there.
Over the course of time, these regular small amounts really add up... now, after less than a year, I have saved £1400 through Plum. I would never have managed to save this much by physically putting money aside myself as I know I'd have kept dipping in to it.
I've recently downloaded a budgeting app called Emma which also links to my bank account and keeps an eye on my spending. I've only been using Emma for a few weeks so I haven't fully got to grips with it yet, but it pops up every now and then to point out how many times I've nipped in to the Co-op this month and how much I've spent there (TOO MUCH!) - making me aware of expensive little habits like this is going to be a huge help to me in changing my spending.
Vow To Pay A Percentage Of Your Earnings To Your Savings Account
After I'd worked out my monthly spend and made the cuts and savings I felt comfortable with, I sat down and worked out how much I was likely to be able to save each month.
This is more tricky to do as a self employed person when you're never sure of what your monthly income will be, but I decided to pay 20% of each incoming payment in to my savings account automatically - from my calculations, this should be doable and should mean that we manage to amass some savings over the course of the year.
I'm feeling pretty optimistic about being able to hit my next savings goal this year thanks to all of these little changes and actions. Do you plan to overhaul your spending and savings habits in 2021?
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