How to save money each month

Though most of us want to save money, it’s sometimes difficult to know the best way to do so. Whether it's sticking to a budget, repaying your short-term loans , or putting cash into a savings account, knowing where to begin can sometimes be overwhelming.

It’s often difficult to find the motivation to save – especially when what’s left at the end of the month doesn't seem like it would stretch too much further. But starting somewhere, no matter how small, can set you on a path of good financial habits.

So, if you’ve been wondering how to save money or where to save money, we’ve pulled together some insights to help you.

In this guide: 

• Set up a savings plan
• Check credit card interest rates
• Switch energy tariffs
• Save on your car insurance
• Look into a cash back credit card
• Review your mortgage
• Try a no spend weekend
• Cancel unnecessary subscriptions
• Review your phone plan
• Why should you save money each month? 

1. Set up a savings plan

If you’ve been wondering how to save money from your salary, coming up with a realistic budget is likely to be your first port of call. You’ll need to make a note of your income as well as your outgoings to establish how much you’re going to be able to put aside each month. After doing this, many people choose to follow the 50-30-20 rule. This involves putting:

• 50% of your income towards your needs, such as rent and utility bills
• 30% towards wants, like subscriptions and travel
• 20% towards your savings goals

While these percentages provide a handy framework to follow, they can be easily adjusted to suit your unique situation. Also, you don’t always  need to put away huge chunks of money – if you set aside little and often, you’ll see your funds grow without stretching your budget too far.

2. Check your credit card interest rates

If you find that you’re spending more than £50 per year on credit card interest, one way you could cut this down is to shift to a 0% balance transfer card. A 0% balance transfer card can help you pay off your existing credit by moving the balance from one card where you may be paying interest, to a new one at a 0% interest rate for a fixed period.

The savings you can make with an interest-free card could help you keep in control of your finances. But it’s important to remember that you must meet the monthly repayments, or you’ll lose the interest-free period.

3. Switch energy tariffs

If you’re wondering how to save money on energy bills, or how to save money on your electric bill, have you considered switching energy tariffs?

If you’ve not switched tariffs in the last year, you’re likely to be on your provider’s standard tariff. A standard tariff is a good option if you want flexibility and don’t want to be tied down to a contract, but the variable prices mean that you may be paying far more than you need to.

With a variable tariff, your provider can alter the unit rates for gas and electricity anytime during the duration of your contract. This means that your monthly bill can rise, even if you use the same amount of energy.

Fixed-rate tariffs usually represent the best value for money as they cap the unit price of gas and electricity for the length of your contract, which can be anything from one to three years. If you haven’t already, try using a comparison website to help you shop around to find more affordable tariffs.

4. Save on your car insurance

Still wondering how to save money each month? Another simple way is by saving on your car insurance:

1. Change policy: Often if you find a cheaper deal and you’ve not claimed on your current policy in the past, you can cancel and get the rest of the year refunded. This means you won’t earn this year’s no-claims bonus, but it could be worth it to help you save and avoid future price rises.
2. Check for a cheaper deal: To ensure you find the cheapest price possible, shop around and get quotes from multiple comparison sites. Once you’ve found the cheapest quote, see if you can get cashback.

If your car insurance automatically renews, you may be able to cancel depending on your insurer’s terms and conditions. When you first purchase a new policy, you should have two weeks to change your mind and cancel – usually without paying a penalty.

5. Look into a cash back credit card

When you use your credit card to make a purchase, the retailer has to pay the card firm a transaction fee. With a cash back card, you’ll earn a percentage of that spend back.

The rate of cashback will vary depending on where you shop or how much you spend, and some purchases might not earn you any cash back at all, but it can be a simple way to save money. These funds are paid monthly or annually as a credit on your card balance, but the maximum amount you can receive is usually capped.

Just make sure to keep the spend within your means and pay off your credit card in full each month so you don’t have to pay any interest.

6. Review your mortgage

Providers recommend that homeowners avoid paying more than 30% of their income on a mortgage to leave enough money for unexpected expenses. However, millions of homeowners end up paying their lender’s standard variable rate, which averages 4.9% in the UK.

Standard variable rate (SVR) mortgages tend to be higher than the rates of other types of contracts. The rate you pay on an SVR mortgage will be determined by your lender, who may increase or decrease it at any time independent of the Bank of England Base Rate.

While not everyone can switch mortgages easily, it’s worth regularly checking for better deals and reviewing your mortgage when interest rates rise.

7. Try a no spend weekend

While it’s important to set aside money for enjoying yourself, why not set yourself the challenge of having a no spend weekend every once in a while? Whether it’s hosting a board games night or visiting a free museum with the kids, there are various ways to enjoy the weekend without blowing your budget.

8. Cancel unnecessary subscriptions

When it comes to how to save money fast, we’d recommend reviewing your bank statement to check whether you’re paying for any subscriptions you no longer use. Cancelling these is a great way to free up some extra funds which you can then pay into whichever savings pot you wish.

If you’re looking for more advice, dive into our guide on how to find and cancel subscriptions you don't use.

9. Review your phone plan

Another top tip is to regularly review your phone plan to ensure you’re getting the best value for money. You can start by checking how much data and call time you use, then compare your current plan with others available.

Why should you save money each month?

Now that we’ve gone through some ideas on how to save money each month, let’s take a look at why it’s important:

1. Save for unforeseen expenses

If you don’t have emergency savings in place, an unexpected expense could mean you need to take on debt. While this isn’t necessarily bad, a rainy day fund can cushion your need to take on more credit than you need. Having too much debt can also put a significant strain on your finances and your wellbeing.

Creating an emergency fund is key to ensuring financial security. With the money saved, you’ll be able to cover unexpected situations – such as job loss, sudden accidents, or illness. Having £500 to £1,500 saved in an emergency fund can give you peace of mind.

2. Save money for your dream house

Effective monthly budgeting is the first step towards achieving your dream home. If you’ve saved a large deposit, you can lower your loan-to-value ratio, giving you a good chance of getting a better mortgage deal. Some of the deals include better interest rates and cashback offers.

3. Saving for retirement

Saving for your longer-term goals is crucial too. According to Which?, a consumer champion in the UK, retired couples need an average of £18,000 a year for their household essentials such as food, heating, and housing. To afford some leisure activities and short holidays, they’ll need about £27,000 a year.

So, putting extra money away during your working years can ensure you have the funds to live comfortably later in life.

4. Funding your children’s education

Higher education is becoming more expensive, so with the money you save, why not put some towards your child’s education fund? You’ll give your children the best opportunity to make headway on achieving their goals – without pulling on your purse strings.

Stay committed, stick to your budget, and see more of our tips

There you have it, everything you need to know about how to save money each month. All you need to do now is stay committed and stick to your budget. And if you’re wondering where to save money, we’d recommend opening a dedicated savings account then setting up automatic payments into it.

Looking for more insights? You’ll find plenty over on the Moneyboat blog. There you can dive into our guide: How much can I save in a year?, which is filled with actionable strategies such as putting away as little as £1 a day to hit £365 by the end of the year.