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MSE’s Academy of Money
MSE’s Academy of Money

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11 Trimming your spending

Whether you’ve done a budget or not, it’s a common situation for many households to have more going out in spending than they have coming in on the income side.

There are, though, many steps you can take to trim spending and get you back in balance with your income. Many of these are ‘pain-free’ ways of saving money through simply paying less for the same goods or services.

The image is a photo of two women in a café. One woman has her mobile phone in her hand and both women are looking at the screen.
Figure 9 Time for a catch-up over lunch – and maybe exchange some money saving tips?

Here are some simple ways to cut your spending without radically changing your lifestyle.

  • Paying some bills by direct debit may save you money, for example utility bills. But check this carefully as some bills – such as household and car insurance – may cost more if paid monthly by direct debit.
  • Think about remortgaging if you’re currently on your lender’s standard variable rate, or your current deal is about to end. Saving 1% on a £100,000 mortgage saves around £80 a month (you will look at remortgaging in the session on mortgages later in this course).
  • Check the market when it’s time to renew insurance premiums. They are often increased each year, relying on customers not bothering to switch to another company. Also check that you’re not paying for any ‘extras’ you didn’t ask for or want.
  • If you’re paying high interest on your credit cards, look to see if you can transfer your balance to a new card at 0% – you can usually do this for a small fee.
  • Often, with household bills such as phone, broadband and TV, switching between deals or suppliers can present major savings. Before the current energy crisis, switching to a cheap fixed deal was the best way for energy customers to save money. However, since 2022 that has changed and the UK Government has intervened to try to help protect consumers from escalating prices. For the latest updates see MoneySavingExpert’s dedicated energy help.
  • Take time to do a check on your energy usage and how it can be reduced. For example, turn off lights in empty rooms, turn off appliances not being used at the plug or main switch, turn down the thermostat to save on energy bills and only do a machine wash of clothing when the tub can be completely filled. These measures will help the environment too.
  • Consider getting a water meter, especially if you use low amounts, or there are fewer people living in your house than the number of bedrooms you have.
  • If you’re paying for a gym and don’t go very often, see if you can do pay as you go instead. Alternatively, can you work out at home or go for a run in your local area?
  • Think about whether a branded item is really value for money or if you can live with buying a store’s own brand, or a non-branded item.
  • Cut down on the number of takeaway meals you have – cutting from two to one a week would typically save over £250 a year and probably be healthier for you too.
  • See if you can get a cheaper mobile tariff. Check the market to see what’s out there and be prepared to switch. If you don’t want to move, call your mobile supplier and ask if they’ll match the deal you’ve found.
  • Buying in bulk for items such as contact lenses saves a lot of money.
  • Ditch your morning coffee from the local coffee shop. It’s much cheaper to make it at home.
  • Taking packed lunches to work can save £100s a year on lunch costs.
  • Buy fresh fruit and vegetables in season. Check whether a local market is cheaper than the supermarket.
  • Make a shopping list and stick to it rather than being tempted by items on the supermarket shelves. Try to use money-off coupons from papers and magazines where possible.
  • Think carefully about buying extended warranties. They are usually poor value for money so it’s usually better simply to put aside some money in case of a problem.

To provide a focus on how to cut spending make a league table of your non-essential spending starting with the items you would be least happy to curtail spending on and ending with the item of spending you would be most prepared to cut or curtail completely. You then have a plan in place to adjust your household budget if spending on essentials requires economies to be made – you start at the bottom of that league table and work upwards.

And if you are struggling to keep a lid on different aspects of your spending you can enforce more discipline through the ‘piggybanking’ technique. This is where you set up a series of savings or bank accounts for each major category of spending – for example holidays, socialising, clothing etc. You then assign your income to each account in accordance with your budget plan. If you keep to the discipline of never spending more on each spending category than is in its assigned account, then your overall budget will stay in balance. It’s just like the well-known method of using jam jars to share your income between spending categories – except your money is safer in accounts and you could earn some interest too!

Next it’s time for the end-of-session quiz – best wishes for this.

After the quiz it’s time to round up what has been learned in this session, and where to go for further information on budgeting and taxation.