Now that you’ve calculated exactly what your monthly expenses are, it’s time to devise a strategy for reducing them.
The best way to approach this problem is to split your monthly outlays into two parts: the essential bills, such as your mortgage repayments and energy bills, and the non essentials, like luxuries and entertainment.
This article will focus primarily on tackling the former (click here to read our article on cutting out the latter).
Savings to be made everywhere
Essentials are things that we absolutely cannot go without every month, so you may wonder how much savings, if any, you can make here.
But in truth many households are paying significantly more than they need to on such bills, yours included.
Let’s take a look at the key essential outlays that eat up your monthly income, and how you can save on each of them.
Mortgage: It’s the biggest single expense for most households, and that makes it the best place to start looking for savings.
There’s no getting around the fact that mortgages – especially fixed rate deals - are more expensive than in the days of easy credit, but this doesn’t mean you should simply languish on your lender’s standard variable rate.
Provided you’re willing to spend a bit of time shopping around, you should still be able to locate a reasonably competitive deal that will shave hundreds of pounds off your annual repayments.
Make sure you don’t pick a deal base purely on the headline rate, however, as some lenders will offer what seems like a decent deal, but then bulk up their profits with a massive arrangement fee. (Read more here)
Energy: Energy bills are another area that has witnessed a dramatic rise in costs recently, with most households paying well over £1,000 a year for their gas and electricity.
Switching to a cheaper provider is a good way to cut costs in the short run - just be sure to compare prices in your specific area first, as providers’ tariffs vary from town to town.
But with suppliers changing their prices almost weekly, the only way to achieve a lasting saving on your energy bills is to switch to an online tariff and pay by direct debit. (Read more here)
Food: Food is eating a larger chunk of our disposable income these days, so it’s an obvious target for household savings. We’re not talking about supermodel-esque fasting, just watching what you spend your money on.
Takeaways are great for when you just can’t be bothered to cook anything, but they are expensive. Reduce the amount of times you eat out or get takeaways and you’ll be better off for it (both financially and nutritionally).
Consider buying more no-name brand goods at the supermarket. The quality is essentially same, but the price most definitely isn’t. If you’re an impulse buyer, you can save yourself a small fortune by purchasing all your groceries online. Once you have filled out an order, you can save it to your computer and re-order it with a single click, thus avoiding the temptation of ‘perusing the aisles’ every month. The money you save on transportation should help cover the delivery fee (usually around £5).
Finally, change your eating habits at work. Bringing in lunch from home and skipping that morning Starbucks coffee will result in a significant saving over time.
Credit cards: If you have any credit card debt, it’s essential you shift it to a 0% balance transfer credit card immediately to avoid racking up any more interest.
There are still a host of competitive deals to choose from – as you can see HERE - but be careful which type of card you go for. If you owe a small amount of money and will be able to pay it off quickly, go for a balance transfer card that offers a short interest free period but charges no fee whatsoever.
If you have a fairly sizeable debt that will take a while to clear, choose the card with the longest possible interest free period, regardless of the fee. (Read more here)
To read our final budgeting article, which focuses on cutting out those non-essential outlays, click here.
