How to Save Money

There is no greater feeling than having independence and the freedom to choose what you want to do when you wake up in the morning.

I’m not there yet and I’ve possibly got a long way to go. This is my long-term goal: to become financially independent. You might be saving money for a house, or saving money for a car. You might even be saving money to retire early. No matter what your goal is, there is always a reason to save money

Over the past year I’ve made some alterations to how I am saving money and I’m very pleased with the changes I have noticed. I have always been looking for simplicity, and now I think I’ve found it. 

This post will not go into any depth about tips on investments or what to do with the money once you have saved it. That’s a topic I will post about later. Instead, this post will be about how to start saving money and my money saving tips.

If you are in debt, stop reading this post and read this one instead! 

  • Keep a record of your expenses and outgoings: This one is really important. How can you reduce your spending when you don’t know where your money is going? I keep a spreadsheet with broad categories –  such as ‘Entertainment’ or ‘Groceries’ – and I update it each month. Then I take a lot and see where my expenses are increasing and where and how I can save money.
  • Determine essential spending: You can save money anywhere: food bills, entertainment, home insurance. But sometimes spending money is essential and you have to admit that the price you’re paying doesn’t get any better. Take nappies for example: they’re expensive, but it’s essential my newborn baby has them (top money saving hack: we find the ones on Amazon good, or failing that Aldi (although the ones at Aldi sometimes aren’t a great fit)). People sometimes suggest reusable nappies. We’re not that hardcore yet!
  • Reduce your spending: My good friend was complaining that he never has any money. He orders a takeaway at least three times a week for his family. If that’s £60 a week, he’s spending over £3k a year on grease. He’s a nurse and earns about £30k. That’s 10% of his gross salary on takeaway food. You might’ve come here expecting a money saving plan. What’s the point? You’re almost certainly spending too much money on stuff you don’t really need. Extortionate gym membership? Expensive clothes? We don’t do that here. We tell you to stop spending money on things you probably don’t need. That’s our simple saving hack.
  • Increase your income: think of your personal finances as a business. You have expenses and you have income. The difference between the two is either a profit or a loss. To make a profit, a business will look to reduce expenses and increase earnings. You should do the same and balance the books. I’ll explore how to increase your income in another post, but some quick tips for now: ask your boss for a payrise, develop new skills and get a side hustle, look for a new job which pays more. 
  • Automate your savings and pay yourself first: each month after I get paid, an amount goes straight from my current account to my ISA. This is the minimum that I’ll let myself save. Usually I top this up at the end of the month when I’ve worked out what hasn’t been spent. I want to forget about my savings and investments and make the process as simple as possible. 
  • Ignore others: this is my motto. The Ferrari my neighbour drives? I would bet my ISA that it was bought on finance. The holiday that my friend took to Thailand? That was bought on a loan. I’m happy with my holidays in the UK and my cheap hatchback. My priority is to retire early. 
  • Set short-term and long-term goals: I don’t judge people here. You might be saving for a new handbag or a new car. It doesn’t matter. What’s important is that you are realistic about your savings. It helps me to set a short-term saving goal. 25% of your salary a year is a good saving goal. That’s achievable for a lot of people and would put you in a really good position down the road. Long-term goals are a good idea too. Set your sites on something and go for it. 

As you can see, saving should be simple. That’s not to say that it isn’t difficult. I often have to physically stop myself from buying things that I don’t need. Right now I’ve taken a break from looking at motorcycles I’d like to buy to write this blog post. Everyone is tempted to splurge out at some point, but try not to cave in and always remember your goals. 

People are often deterred from saving, as they feel they didn’t start early enough. It’s easy to get caught up in all the hype about Warren Buffett buying his first stocks when he was eleven. But remember point six above: ignore everyone else

I am against extreme frugality. I think people should enjoy comforts during their limited time on earth. Of course, excessive spending can mean you don’t get to spend time on your own terms. It’s a fine balance for sure. But if there is something I want to buy that will bring me genuine pleasure, I see no reason not to buy it. 

Let me tell you a story before you go. The other day, I was chatting to a business associate. He had just bought a Rolex on his credit card and was clearly proud of it. It cost him £12,000. Politely I showed an interest. Inside I was screaming. 

‘You should get one!’ He said. 

I nodded. 

In years past, owning a Rolex was something I aspired to. But ironically, now I want the time that the money could buy. 

I relayed the story back to my wife when I got home. 

I could buy a Rolex and not put it on a credit card. But I choose not to. Now how powerful is that?

What are your money saving tips? Let me know in the comments below!

Follow me on Twitter @swearingmoney

***The information contained herein does not constitute financial or other professional advice and is general in nature.
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An introduction to FIRE in the UK

I’ve written about clearing your debt. In my mind, that’s the most urgent thing for you to do, which is why I wrote about debt first. 

Any credit card debt or money owed for items bought on finance should be cleared as soon as possible. If you’re still paying a high interest rate on something, look at my last post. Your debt is slowly compounding and spiralling out of control as you read this post. 

Now I want to explain why I’m writing this blog.

I’m not your typical FIRE (financial independence, retire early) blogger. Usually, they have either a perfect past and any pound (or more common, dollar) earnt is invested wisely, leaving the author in a position to be financially independent in their 30’s. 

At the other end of the spectrum, the writer might have had debt up to their eyeballs. Everything they could, they bought on finance. The blog usually follows them clearing their debt first, and then their journey towards financial independence. 

And then there are those middle of the road types. I look around and I’m like so many of my friends and family. My financial position was probably similar to yours:

  • Late twenties/early thirties
  • Average income for the UK
  • About £5,000 of credit card debt
  • Nothing else purchased on finance, but no money saved

My biggest outgoings at the time were food and drinks on nights out. I could easily spend £100 on a night for drinks, food and a taxi home. I’d probably do that three times a month. Looking back, it was crazy. But my friends were doing it, so if I wanted to see them, this is what we did.

I wasn’t suddenly enlightened by the FIRE movement. I’d always wanted to retire early but without earning big money, I didn’t think it would be possible. Then I read an article in the Guardian, and learnt that I could in fact retire on my average salary. All I had to do was to be frugal. 

By this point, I’d cut out my credit card debt. As soon as it was cleared, it was like a weight lifted off my shoulders. 

I tracked my spending and made a few adjustments in order to boost my savings rate.

In this time, only a year or so ago and before our child was born, I was trying to find a blog about financial independence in the UK. The Reddit FIRE UK thread was brilliant, and Mr Money Mustache’s forum has a sub-forum for the UK, but otherwise I couldn’t find anything that fit my requirements. Everything was geared towards to the United States.

This website hopes to fill that gap. A blog about FIRE aimed at readers in the UK, but I hope it is also helpful for people around the world. 

Enjoy!

Follow me on Twitter @swearingmoney

***The information contained herein does not constitute financial or other professional advice and is general in nature. This post contains affiliate links.

First Step: Debt Management

I haven’t always been a saver. That may come as a bit of a surprise to those of you who have read other financial independence websites. 

Often, the writer has managed their debt, controlled their spending, and is living a life without any money related stress. Not here!

You may not be aware, but people who have grappled with debt in the past can become financially independent. In some cases, it may be why some people have become financially independent in the first place. 

A few years back I had a credit card. I had no idea how to effectively manage this, and it wasn’t earning any money or rewards for me. The credit card was sitting there, mine to use when my cash-flow was a bit low. Meals, birthday presents and clothes were bought on this borrowed money. Slowly, compound interest worked against me increasing my debt, and what was a minimal figure mounted up into a few thousand pounds. 

At this stage, I know some of you will have a credit card debt of tens of thousands. You might even have car loans that you don’t think are hurting you. You might even have bought a fridge on a finance agreement. My thoughts that any form of interest that isn’t earning you money is hurting you and must be avoided at all costs. 

Here are a few steps which worked for me in reducing and clearing my credit card debt:

  • Track your spending: this is my top tip for anyone who is trying to build their net-worth. How can you reduce your spending if you don’t know where all of your money is going? What may appear to be a small figure quickly adds up. Two daily coffees for £3 each adds up to £180 a month, or £2,160 a year. At 20% APR over three years, this would almost amount to £9,000. Scary! Once you’ve tracked your expenses, you can look at what areas have fat to cut. It might hurt, but so will your spiralling debt if left unchallenged. 
  • Live within your means: I’m not a fan of extreme frugality. Enjoy life but always live within your means. Can’t afford a luxury holiday? Then don’t go!
  • Consolidate: I only had one credit card, but if I had several, I would have looked to combine them together to consolidate my debt. I think that debt is easier to tackle when it is all in one place. 
  • Introductory offers: take advantage of 0% APR offers. Having your debt not compounding against you is a good thing. But it’s worth keeping an eye on what the APR is after the honeymoon period. 
  • Let your credit card work for you: I have an American Express Platinum credit card that I automatically clear each month. Over the year, it earns me almost £200 in cash back. It’s like a mini employee. I do nothing but spend and get paid for it. Of course, this only works when you live within your means and clear the balance each month. 
  • Read: The more information you take on, the more you will learn. Educate yourself about personal finance. JL Collins’ book is a great place to start.

I finally decided to tackle debt when I had the urge to become financially independent. I hadn’t read any blogs or websites, and wasn’t aware of the movement, or even the ‘financial independent’ term, but I wanted to retire early. I was sick of working to make other people rich. 

Debt should not be a barrier to becoming financially independent and retiring early. Actually, it can often serve as a wake up call to control your spending and tackle it.

Follow me on Twitter @swearingmoney

***The information contained herein does not constitute financial or other professional advice and is general in nature. This post contains affiliate links.