There has been some good news with regards to the cost-of-living crisis in the UK, with inflation having depreciated in the second consecutive month in December (from 10.7% to 10.5%).
Despite this and Rishi Sunak’s pledge to halve inflation on these shores to just 5% by the end of 2023, the cost of living will remain disproportionately high throughout the year while energy and food will remain prohibitively priced for many.
But what are the most simple and effective ways of saving money this year? Here are some ideas to keep in mind!
#1. Factor Savings into Your Budget
Budgeting is central to managing your finances, especially during times of economic contraction.
It’s particularly important that you budget accurately and in pence rather than pounds, while we’d also recommend factoring in a desired rate of savings into your outgoings.
Start by calculating your budget without factoring in savings, as this will help you to determine precisely how much disposable income you have each month. Then, aim to commit at least 10% of this into savings, while including this amount in your budget going forward.
From here, you can create a consistent pattern of saving money, before looking to increase the amount you save incrementally over time.
#2. Cut Costs Where Necessary
If we accept that inflation is currently impacting heavily on the cost of living in the UK, it’s important to consider what category of prices are most affected at present.
Make no mistake; it’s energy and food prices that are most vulnerable to inflationary pressures at present, and while wholesale energy prices dipped in the final quarter of 2022, things aren’t likely to get noticeably better for the foreseeable future.
It’s important to target these items of expenditure if you’re to effectively reduce your own cost of living in the current economic climate, ideally by capping unnecessary energy consumption in your home (and regularly submitting metre reading) and creating meal plans to help minimise the cost of food.
These seemingly small but significant changes can drive incremental gains over time, as your monthly spend diminishes and your disposable income increases.
#3. Think Outside the Box to Unlock Further Savings
It’s also important to maintain an open and creative mind when saving money, with this helping you to embrace ideas such as the viral 1p saving challenge.
This requires you put a single penny away on day one of the challenge, before increasing the amount that you commit to savings by £0.01 every day.
This leads to slow but incremental wealth accumulation, which can leave you with savings over more £500 over the course of the year.
This is no meagre sum, and while committing to such a challenge requires discipline, it’s a great way to build some initial savings out of nothing.
This requires you put a single penny away on day one of the challenge, before increasing the amount that you commit to savings by £0.01 every day. This leads to slow but incremental wealth accumulation, which can leave you with savings over more £500 over the course of the year.