Are you trying to survive on a low income? Maybe your household only has one person earning a salary, or you both have huge pressures on your finances.
Whatever your circumstances, even if you are earning well and not going into debt, there are a whole bunch of reasons why living below your means is important.
When you live below your means, you can:
- Avoid the stress of debt.
- Save money for a rainy day.
- Save money for future goals – such as that dream holiday or new home.
- Invest money – so that you can make your money work for you. Building wealth by taking advantage of compound interest (where the money you have invested earns money, and that money then earns money) means you can help your kids out in the future, retire early, or choose to work less.
One of the most exciting things I have come to understand about money is that living below your means and building wealth is not ALL about income. So much of it is about habits and consistency.
And the best news is, it does not have to mean you never have any fun.
Here are the most transformative budgeting hacks that I have come to learn since taking control of my finances and taking a real interest in my money.
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Budgeting hacks that really work
Understand the numbers
Any good budget starts off with ripping off the band aid and taking a good look at the reality of your income and spending. You cannot set a budget without doing this.
The good news is that once you have done it, the maintenance is easy.
Start by taking a look at these numbers:
- Your income
- Any debts
- Your fixed essential expenses – your housing, bills, car and food
- Your non-essential fixed expenses – subscriptions, gym memberships and any other monthly/annual payments
- Your other spending – this is stuff that fluctuates from month to month and includes shopping, clothes, holidays and birthdays
For me personally, I would want to see the fixed expenses and the debt repayments covered first. That means I would look at cutting expenses from the final two categories in order to fund getting rid of the debt and keeping a roof over my head.
Figure out your minimum repayments on the debt and work out how much you can afford to pay a month, as well as how long that will take you to clear the debt. Getting yourself back into the black is a really important step towards balancing your budget.
If you are debt-free, that’s great! In that instance, you want to focus in on how you can free up money to save and invest.
Using a budgeting tool such as this amazing spreadsheet can really help.
Trim the spending
We cannot get rid of all spending – that’s unrealistic. But once you start paying attention to your budget, you may be surprised by how many things you are overpaying for.
Seeking out best value is one of the most important frugal living tips I have taken on board in recent years, and it has saved me thousands.
It’s not just about resisting impulse shopping, it’s also about how much you spend on essentials that you could be getting for far less.
For example, could you downsize your home? Do you have to have two cars? Could you downgrade to cheaper cars? One of the biggest expenses many households face is a monthly car repayment – many frugal people aim to own their car outright and then keep it running for years rather than upgrading to a flash new one.
We have managed to save hundreds in a matter of hours by renegotiating our phone and broadband bills.
Decide on what you really need
Take some time to think about what you will need in the coming 12 months and beyond.
What are the expenses that will come up this year that will be unavoidable, or that you are concerned could be an issue.
For me I have a slight concern about our washing machine. It’s been going for 10 years now and I am not fully confident it has another 10 in it. In the back of my head, I am allocating £300 to replace that at some point when it gives up.
Other expenses that could be coming up might include a special birthday where you may spend a little more than usual on the celebration or gifts, or an expensive school year.
Consider the stuff you will have to buy, as well as the things you would like to be able to afford this year.
Make a plan for how you will afford those. Setting up a sinking fund can really help with this. It’s separate to an emergency fund and it’s where you put money for the expected costs.
Those include annual insurance renewals, birthdays and Christmases.
All you need to do is work out those costs, then divide the number by 12 and commit to setting money aside every month for those things.
By figuring out your expected costs now, and making a plan to spread the costs of those, you’ll be less likely to overspend and face stress in particular months when your budget comes under greater pressure.
Set a goal
Setting a budget and sticking with it is going to be really difficult if you do not set goals that matter to you.
You need to have that bigger picture in mind, especially if you are trying to let go on old spending habits that have held you back.
So, consider why you want to save money. Do you want an emergency fund to avoid going into debt and to build a foundation so you can go on to invest? Do you want to save for a holiday? Do you want to save for your first home?
Decide on what the goal is, how much you need and then create a realistic plan to get there.
Start small
Every single month, get a fixed amount of money and put it into a savings account with a good rate of interest. Sounds simple and easy? But it’s actually not. Because regular saving when you are getting started is boring. It requires willpower and a sense of the bigger picture.
This year I experimented with setting aside a small amount every week and I’ve managed to save over $1500. It really didn’t feel like much.
I set up a regular payment using an app for a savings account. I can change it whenever I want if I need to, but I made a promise to stick with it and that money goes out every Wednesday then I top up the savings when I have had a better earning month than expected.
Forming this very simple habit can make all of the difference.
If your budget is tight, start with 5% of your income and go from there.
If you can then build to saving 10% or 20% of your income every month, then you’ll have helped yourself make saving a habit rather than an afterthought.
The progress of building up a savings pot even with a small amount can be so rewarding that you’ll want to carry on with it. And then interest kicks in and helps you gain momentum. Once that happens, it stops being boring. Then you’re building wealth and that unlocks doors, the key ones being less stress and more freedom to choose what to do with your money.
Avoid subscription creep
Have you noticed that everything you buy now comes with a monthly spending commitment?
You get it with music streaming, beauty brands, accessing audio and ebooks, storage for your Apple devices and of course entertainment streaming services.
Having a proper review of your subscriptions could save you as little as $10 a month or as much as $100 a month.
Write down all of your monthly commitments and ask yourself these two crucial questions:
Do you need it? Are you using it enough to justify the price.
Could you get the same thing for less money?
With TV subscriptions we like to rotate them every couple of months so we can watch different shows. We try to never have more than two streaming subscriptions at any one time.
You may find switching to a similar service to what you’re using may come with a discount for the first few months, so you could take advantage of that reduced price.
Try a low or no buy month
If your savings goals are lofty then consider a low or no buy month challenge. Lots of people like to do this in January, but really there are no rules. Pick a month and commit.
A no buy month is where you do not buy anything that is non-essential at all. Groceries are fine, takeaways are not. New school shoes for your kids are fine, another pair of trainers when you already have five pairs is not.
People who struggle with having no fun money at all could consider a low buy challenge. This is where you cut your fun money budget down really low. You could focus your low buy challenge on particular categories of spending, such as clothing, eating out, takeout coffees and smoothies, or new stuff for your home.
If it goes well, consider extending your challenge beyond the month. When your savings goals are ambitious, this can really help you along the way.
And it can also help you realise just how much of a toll mindless spending can have on your budget, and encourage you to be more intentional in the future.
Be aware of your triggers and make sure you are taking steps to avoid them, this will make it so much easier for you to stick with your guns.
For me I know I still succumb to the lure of the influencer and all the fabulous clothes and things they have.
I remind myself of this: it’s far easier to make a living from selling people stuff than it is from telling people about the products that are not worth their money.
Selling you new things every day is a business for influencers. So don’t let the image they have built for their business, make you think that’s what your aspirations should be or that it’s a reflection fo real life.
Focus back on those goals you have set yourself, rather than trying to keep up with people whose own life goals perhaps don’t align with your own.
Give something up or downsize
If you are on a tight budget and struggling against the tide of rising prices, something has to give. Either you need to find a way to up your income, which may be tricky if you’re a parent and there’s little extra time in the day around work and family life, or ditch things from your budget.
For me at one stage, that was haircuts and colouring at the salon. I went through several years of doing it all myself at home. I now allow myself two trips to the salon a year. I managed to save hundreds a year by doing this.
What you choose to sacrifice will be personal to you, but you don’t have to give whatever it is up altogether. I still colour my hair, I just leave longer between salon visits. If you love getting your nails done, can you find some tutorials so you can do it better yourself at home?
$1/use rule
This rule has helped to curb my unnecessary spending on stuff like clothes and things for the home and seek better value for my money.
Whenever you are looking to buy something new, think about the cost and how many times you will use the thing. Divide the cost by the number of times you will use it, and you get the dollar or pound per use.
So if I buy a new dress costing $50 and I will wear it once, the cost per use is $50. Whereas if I buy a pair of jeans I know I will wear at least once a week for a year then the cost per use is less than $1.
Strive for a low cost per use with everything you buy. If you have a wedding or day out, shop your wardrobe first. I bet there’s something there you could use. Or consider organising an outfit swap with friends who are a similar clothing size to you.
Get it free or cheap
Join communities in your area that swap or give away unwanted stuff. There is a goldmine of free stuff out there that people are desperate for you to take off their hands, as long as you can pick it up you can get it either free or cheap in community Facebook groups.
There’s also an app called Olio in the UK where people give away unwanted food to avoid waste.
If you are not a fussy eater then try Too Good To Go which has huge restaurant, supermarket and cafe brands that give away bags of cheap food every day that’s about to go out of date. Make sure you freeze it or have a plan to use it.
Face your nice-to-haves budget
Sometimes it can help to come face to face with the reality of your spending. A lot of people don’t like to sit down and set a budget, or have a vague idea of their spending in their head. And if you know you’re not overspending every month maybe you don’t stop to analyse it all that much.
But there’s a huge amount of value in sitting down and really understanding how much you spend a year on nice-to-haves like take-out coffee, takeaways, subscriptions, home decor, hair and beauty treatments, gym membership, car finance payments, nights out, and home decor.
Once you face the number, you may well be more motivated to make changes that will allow you to save more. You’ll do them less frequently or search for a cheaper option.
This also applies to things like your supermarket shop. Can you swap certain branded, more expensive, products for generic store brand items? They are often just as good.
Cut your Amazon spend
Buying junk on Amazon is so easy to do especially when you are a Prime member and you know you’ll get the free fast postage.
To stop yourself shopping for stuff you don’t really need, try to check out just once a week. Add stuff to your cart, and then review that at the end of the week and decide if you really need it – you’ll probably happily delete at least a couple of items.
Embrace boring dinners
Not every meal has to be exciting.
It’s great to find a new recipe, but plenty of times we have cooked something because we wanted something exciting and the ingredients cost $25.
It’s OK to have scrambled eggs on toast for dinner or some soup made out of leftovers in the fridge. Embrace a boring dinner at least one night a week.
We actually go one further than this and stick with a limited list of recipes we rotate through. By doing this we use up ingredients we have and have quite a short list of groceries we buy regularly. This has cut our food shop by hundreds.
Use AI to avoid food waste
Save money on food by not going to the supermarket until you have used up the food in your fridge and cupboards.
If you are staring at what is there with no ideas for what to make then use ChatGPT to get ideas. This AI chatbot can be used as a giant search engine.
Just tell it what ingredients you have and it will give you recipes.
Make simple changes to save on energy bills
You can shave pounds off your energy bills every year by making small changes like these:
- Wash clothes on cooler washes – keep it at 30C
- Turn the thermostat down one degree
- Turn the heating off overnight and layer up in bed with extra blankets
- Switch to LED bulbs which consume less electricity.
- Don’t tumble dry, air dry clothes outside or use a heated airer which runs much cheaper
Embrace sustainable living
There is a huge overlap between frugal living and sustainable living. It’s all about wasting less and making the most of what you have, which mean you’re not spending as much on new stuff.
Here are some great sustainable living ideas that also save you money:
- Learn how to repair your clothes
- Use as many reusable products as you can, for example cut back on kitchen paper towel usage and use cloth towels instead, using washable face wipes to remove make-up
- Always bring your own snacks everywhere you go
- Try cycling or walking to where you need to go
- Go to the library instead of buying new books
- Look after your stuff – for example by caring for your clothing you can pass them on between siblings or sell them to get some of the money you spent back
Check out my sustainable swaps that can save you money.
Put your money somewhere smart
Where your savings should be depends on a huge variety of factors like your age, how much longer you’ll be working and your earnings. But whatever you do with your money, make sure you have a savings plan and that you’re putting your money somewhere it will work hard for you.
Keeping savings somewhere like a virtual jar on one of those savings apps or stuck in your current account means the value of your money erodes because you’re not getting as much interest on it as you should be.
Take a step back and consider not only what you can afford to save but also where you could be in 10 years if you find a way to get the most interest out of your money so that you are beating the rate of inflation.
This is what my savings portfolio looks like:
- Emergency fund – three to six months of expenses in an easy access account
- Expenses fund – money for annual expenses such as Christmas, holiday, birthdays and insurance renewal in an easy access savings account
- Retirement – money for when I stop work, placed in a pension fund
- Investments – money I set aside for the long term in order to build wealth.
Commit to improving your financial education
One of the best things I’ve done for my money in recent years is to just take an interest in personal finances and money management.
I read the money advice columns in newspapers, I read articles from experts about the latest data on how much the average person earns or has saved, I read personal finance books to get inspiration for making solid financial decisions. It’s inspired me to make small changes now, with the expectation that they will add up to big improvements in the coming years and to take advantage of investing for my longer-term financial goals.
Doing this has helped me understand the potential pitfalls, such as the common scams and the fact that there’s no such thing as easy free money, and given me confidence in making financial decisions.
Make just ONE money move today
If all of this feels overwhelming, I get it. But everything can be broken down into small steps, rather than one huge leap.
So why not pick just one thing to get you started today. It could be:
- Writing down all of your regular outgoings
- Cancelling a useless subscription.
- Check any accounts where money may be lurking – for example banking apps and any money-making apps you use such as survey sites like YouGov or cash back sites like Airtime Rewards or TopCashback. Many of these don’t pay you automatically, you have to withdraw!
- Setting up an auto transfer to your savings account
- Calculating your expected expenses for the year – Christmas, birthday, insurance renewals – and making a plan to afford those.
- Check in on your pensions and seeing whether you are saving enough for the lifestyle you want in retirement (there are calculators online that will tell you how much you need).
I hope these tips gave you some great ideas for how to get started with budgeting! You can also check out my 70+ frugal tips for more help with living below your means.
