Ultimate Guide to Saving Money on a Tight Budget

Want to save more money even on a tight budget?

If you are regularly spending most or all of your income before you can add any pennies to a savings pot then it can be a vicious cycle.

Savings can give us a huge amount of peace of mind – to cover emergency costs and future expenses.

However with the cost of living, being able to afford just the basics can stretch us beyond our means.

Benefits of savings

Savings help us to cover emergency costs, they helps us create a life that we love whether through investing in building our skills to help with a career change or funding things that bring us joy.

They are a reassurance that our dreams for the future can happen because we’ve got our finances in order to make it happen.

They also help us to avoid debt should the unexpected happen, like losing your job or a sudden car repair.

You may also like: How much should be in your emergency fund

How to save when it’s a struggle

How to save money on a tight budget

If you don’t have much of a savings pot, let alone a basic rainy day fund, then don’t worry.

You are not alone. One third of working age households in Britain have savings of less than £1,000.

These tips will help you not only live within your means but actually save money. This works even if you’re on a tight budget.

Be clear on your “why” and have a realistic goal

People who set an achievable goal are far more likely to succeed.

Motivation is absolutely key here so you should be clear on what your goal is. What are your savings for?

Is it for your emergency fund? Is it for an amazing once in a lifetime holiday? Do you need it for your next house purchase?

It can be helpful to think about the SMART principle.

SMART goals are Specific, Measurable (you can track your progress), should be within your ability to Attain, and should be Realistic for you to achieve within a specific Timeframe. What all that means is its great to be ambitious, but you have to be realistic and clear on the numbers.

So forget about all those TikToks telling you this money saving challenge will save you £20k by the end of the year.

Personal finance is called personal finance for a reason. There’s no one-size-fits-all method. There’s no point in setting yourself a ridiculous goal beyond your means and without a plan, because you will likely fail. Which sets you back to square one which isn’t where we want to be.

Decide not only what you need, but also what you can realistically afford.

The 50/30/20 budgeting rule where you put 20% into savings, 50% on needs and 30% on wants is great, but only if those numbers add up for you.

Maybe 70% of your income is needed to go on your needs. So tailor your goal and your budget to you.

Make small changes

You may be on a tight budget because you are on a low income or because your expenditure is high.

If it’s the latter then that’s great because you’ll have plenty of room to cut back.

One of the biggest financial mistakes people can make is increasing expenditure based on your income, sometimes called lifestyle creep, instead of setting that extra money to work for you by putting it into savings you just spend mindlessly.

If you’re on a low income then look for small changes and smart swaps to help you.

Cutting back on spending when you’re already on a tight budget may seem impossible. But there’s always something you can do, maybe you have to get creative.

Try these smart swaps:

Love getting your hair done? Look for a cheaper alternative. A cheaper hairdresser or student hairdressers. Trim it yourself for a few months out of the year, just invest in some hairdresser scissors.
Instead of buying new books visit your library. Better yet, save money on fuel and parking by downloading a library app like Libby and get ebooks and audio books for free from there! They also do magazines which can be another huge expense.
Always pack snacks and drinks to take out with you on day trips or even quick trips out of the house.
Do your own nails at home.
Try recreating your favourite takeaway dishes at home.
Have a ready meal that you really love? See if you can reproduce it at home.
Buy in bulk and batch cook meals. There are so many great food accounts on social media that talk about cheap meal plans for the week. Their advice is free. And it could save you hundreds of pounds a year on your groceries. Cheaper meals don’t have to be boring.
Look for the cheapest fuel in your area – there are apps that can help you find them – and aim to only use that filling station.
Start rotating your subscription services, aiming to only have one or two on any given month.
Negotiate better deals on your broadband and mobile services, or switch to another company.
Cut back on waste. Never run the dishwasher or washing machine unless it’s full, run them on a lower temperature and stop leaving devices on standby.
Don’t buy anything new until you’ve used up the last thing.
Buy secondhand not brand new. And even better, make a deal with yourself that you won’t buy new clothes this year. The fast fashion industry and the “treat yourself” mindset has cost me thousands of pounds over the years. Try to break free of the pressure to buy, unfollow, unsubscribe, change your ad settings in Facebook. Avoid temptation at all costs.
Make sacrifices. This can be tough to give up on certain treats, classes, activities or social occasions that bring you joy. So can you cut back rather than giving them up altogether? Ultimately It’s about finding a balance between relieving financial stress and the stuff we really enjoy that makes life fun.

Pay yourself first

If money languishes in your current account then you are far more likely to feel tempted to spend it.

Once you know what your target for savings is and how much you need to put aside every month then set up a direct debit.

This way the money is locked away in your savings account and you cannot touch it.

Keep track

Taking a solid look at your spending habits can help ensure that paying yourself first doesn’t leave you overdrawn at the end of the month.

I have a spreadsheet that I use every month to keep track of my essential bills, as well as my additional expenses like kids clubs, clothes and books. I can then track my spending too with the transaction tracker.

Burying my head in the sand and hoping for the best was one of the worst things I did for my bank balance. I feel far more in control now that I am aware of where my money is going, and can also see where I may have overspent one month and make changes as required.

Put your money somewhere smart

One of the biggest mistakes I have made with my own finances has been to not consider where I put my money, either through laziness or being overwhelmed with the choice or by assuming I cannot possibly understand this. Not all bank accounts or savings accounts were created equally.

In order to help you hit your savings goal faster you want your money to work hard for you – you’re working hard to save it after all so someone else should pull their weight as well. That means putting it in the best savings account that is most appropriate for you.

If you are on a tight budget then it’s worth noting some savings accounts have a minimum deposit you can make. Whatever account you choose, the amount you can deposit at a time should be realistic for you, so that you’re not put off and you don’t skip a payment.

Once you gain momentum, you’ll be earning nice money on that pot. This is why the rich get richer without really trying, because their money is in smart investments and savings accounts that let it grow without them lifting a finger.

Get your loved ones on board

If you have a partner or family then get them on board as well because when you work as a team you’re far more likely to stay the course than if one of you hasn’t got their heart in this.

It’s particularly important to get people that you live with

Look for ways to up your income

You may have cut back every way you can think of. So in that case you need to look for ways to increase your income.

Say you want to save £10,000 this year, you need £27.40 a day.

There are lots of ways you can find that money through side hustles.

How about survey sites, which you can do in your own time. If you spend an hour a day I think it’s reasonable to expect an extra £200 a month. There’s also mystery shopping and tasking apps if you want something flexible.

Some other great side hustles include becoming a delivery driver – there are tons of companies that take on flexible employees for this type of work such as Amazon and Deliveroo. There’s a huge number of remote working jobs on sites like Fiverr, such as virtual assistant work or data entry tasks. And then there’s fun side jobs like dog walking or pet sitting.