Discover tips and tricks on how to save money.

A report by the Money Charity in May this year, stated that around 36% of households in the UK have no savings, while a further 13% have under £1,500. For many, it's difficult to make significant savings because the entirety of their income is eaten up each month by daily living costs. For these households, living from paycheque to paycheque is very much a reality.

If this sounds like you, and you want to find a way out of this stressful cycle, then it takes a little discipline and hard work. However, following these seven steps will help you start to regain your financial freedom, and help you break the cycle of living paycheque to paycheque.

1.     Get a handle on the facts

Unless you know how much is coming in and going out on the reg., then you are not going to be able to make any meaningful changes. Sit down and figure out your income and then compare it to a list of your regular outgoings. When you have these clear in your mind you are in a better position to make improvements and understand where you need to trim your spending.

2.     Pay your debts

You can’t make meaningful savings without first clearing yourself of debt. This is because debt consumes all your ‘extra’ cash. The longer you have outstanding debt, the more time it has to accumulate interest, which means that you’re not just paying what you borrowed, you're actually paying back more than you borrowed. Tackle your debt with the highest interest rate first. Pay off as much as you can each month, instead of just the minimum payments, and by making yourself debt free you then free up surplus income that you can put towards your savings or pension fund.

3.     Live within your means

Take a long hard look at where your money is going. Once you have identified that you can work towards minimising non-essential costs. If, for example, your expensive car payments are eating up all your extra income each month, then grit your teeth and downgrade to a cheaper model. Live the life you can afford, not the life you aspire to afford.

4.     Automate your savings

Once you’ve got a handle on your incomings and outgoings, then figure out exactly how much you can afford to ‘live without’. This might be £0 at first – especially if you are prioritising paying off your debt. However, as you begin to trim the excess costs you will free up more of your income. Instead of spending it, download an app like Oval Money that allows you to automate your savings. Sweep those extra pounds away into a savings wallet without even thinking about it. Over time, your savings will grow and you can then choose to either put them toward something important, or even to start investing them.

5.     Stick to your guns

You might be surrounded by people who have a higher income than you do. They may be able to afford things you can’t, or to go out and socialise more than you can. If this is the case then you need to be strong and stick to your guns when they ask you to join them. If you can’t afford it, then say ‘no’, even if it’s not what they want to hear. Don’t let yourself be swayed, because breaking the habit of spending money you don’t have is difficult, but it is a sure-fire way to break the paycheque cycle.

6.     Set a financial goal

As with anything, having something to work towards makes it more likely that you will succeed. If you set yourself an ultimate goal then it will be easier to rationalise your spending decisions during the month, especially when you have to say ‘no’ to things you really want to do.

7.     Change your routines

Routines are difficult to change because they have become second nature, and so are difficult to think about objectively. You may feel that you need to grocery shop on a Sunday morning, but it could be cheaper to write a list, shop online, and then get your food delivered. By doing it remotely you are less likely to be tempted to make impulse purchases but you still get all the same discounts that you would in-store.

Similarly, whilst you think your gym membership is utterly essential because exercising is part of your routine, it could be that you can dump the membership and opt for running outside. You can still attend the gym but only pay for individual classes. This could be a cheaper option whilst still making sure you are able to maintain your health.

Finally, just remember that all big changes take time, and so give yourself a little space in order to feel the benefits of your new way of thinking and managing your money.

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