Money is tight for many of us right now, but if you’re concerned about how little cash you have in your bank account, it might be time to stop spending so much. Here’s how.
Set a realistic budget that actually works
As a first step, you should set a budget. But it needs to be realistic, otherwise you’ll simply ignore it and end up no better off. A great place to start is to go through your bank statements, looking at how much you have coming in each month compared to how much you have going out. Subtract your expenses from your income so that you know exactly what you have left for non-essential spending and savings. As part of this process, it’s important to look at areas where you might be wasting money. Are there any subscriptions you could cancel? How much are you spending on clothes and eating out? Could you rein this in? There are several different methods you can use for budgeting, but a popular option is the 50/30/20 budget. Here, you divide your monthly income into 3 spending categories:
50% on essential spending, such as bills
30% on wants or personal spending
20% on savings and debt repayment
Of course, you don’t have to use these percentages – you can adjust them to meet your own goals.
Use a budgeting app to watch your spending
Life is busy and budgeting isn’t always easy. But luckily there are stacks of budgeting apps out there that can offer a helping hand. These can help you track your spending, suggest ways to cut your expenses or identify subscriptions you’re not using. Some apps will even automate saving for you so you don’t have to think about it.
Our budgeting apps guide goes through these in more detail.
Open a current account with Monzo and you’ll be able to set aside some of your cash into separate Pots for different purposes - whether that’s your household bills or holiday savings. You can also use the Salary Sorter to instantly move some of your earnings into these Pots. All of Monzo’s accounts offer spending categories to help you sort your payments so that you know exactly what you’re spending where. But if you upgrade to a paid plan you can create your own categories to group your spending however you like. Upgrading also gives you access to the auto-spreadsheet that can be updated in real-time and lets you create graphs and tables to track your spending.
Representative example: If you use an arranged overdraft of £1,200, you'll be charged interest at 39% EAR variable.
Pros
Easy to set up
Good for budgeting and categorising spending
Automatic saving feature
Fee-free spending abroad
Slick app with face login
Overdrafts and loans available
Cons
Free ATM withdrawals outside the EEA limited to £200,
Get a £20 welcome bonus when you spend your first £20 (T&Cs apply).
The Revolut app offers a variety of budgeting tools and savings features. You can automatically sort your salary for things like bills, savings and spending and you can also open Pockets to set aside money for monthly subscriptions or holidays. Through the app it’s easy to track your spending and assign it to different categories, plus you can link up your other bank accounts to give you a full view of your finances. You can even get notified if you’re approaching your budget limits so you know if you’ve been spending too much. There are 5 different plan types to choose from, including a free option.
Pros
Low overseas fees
Quick sign-up
Earn cashback on spending
Set budgets for financial goals
Virtual cards for online purchases
Easy to transfer money internationally
Linked Revolut <18 account available for one child
Cons
1% currency conversion charge on weekend spending abroad
Free cash withdrawals in the UK and abroad both limited to £200 per month
Obviously, you’ll still need to pay for essentials, such as your household bills, the mortgage, your rent, car insurance and so on, and these can significantly eat into your budget.
But it’s worth checking whether you can take advantage of a better deal on bills such as energy, broadband or your mobile phone. If it’s time to renew your car insurance or home insurance make sure you shop around to find a cheaper policy – don’t simply accept your renewal quote.
Also look at other ways to cut back such as switching to a cheaper supermarket, or batch cooking to save on meal costs.
Even small savings on essential bills can quickly add up and result in you having a little more in your bank account.
Avoiding the trap of lifestyle inflation
Lifestyle inflation or lifestyle creep refers to when your spending increases as your income rises. So, if you receive a pay rise at work, you start spending more of that money rather than saving it.
This doesn’t necessarily mean you use the cash for huge expenses; rather you might start treating yourself to more expensive clothes, upgrading your car or eating out in fancier restaurants.
However, doing this can quickly catch up with you – you might not have stashed away enough in your savings, you might have huge credit card bills, or you might simply feel no better off financially and wonder where your money is going.
To avoid this, you can:
Set savings goals before you spend. Decide how much money you are going to set aside for savings.
Automate savings. Transfer part of your salary into savings as soon as you’re paid.
Track your spending. Regularly review your spending so you can see where lifestyle inflation might be sneaking in.
Practise delayed gratification. If you’re tempted to buy something, wait a few days before you make the purchase. This gives you time to reconsider and can help prevent impulse buying.
What to do instead of shopping: free activities in the UK
Shopping can trigger the release of dopamine, a brain chemical that’s often known as the ‘feel-good’ hormone. Buying something new can boost our mood and make us feel happy which is why it can be hard to stop.
But shopping regularly can lead to overspending and once the thrill wears off, you might feel regret or guilt. Fortunately, there are plenty of free activities you can enjoy across the UK if you’re trying to reduce your spending:
Go for a hike or bike ride
Head to the coast and enjoy the sea air
Visit a free museum
Join a local choir
Check whether your local library offers free activities, such as crafting days or book groups
Host a board game or film night
Try volunteering
Explore a new city on foot
Get support: free debt and spending advice services in the UK
If you’re concerned about the amount you’re spending and you’re struggling with debt problems, it’s important to seek help immediately.
If you’re finding it difficult to meet your repayments for your mortgage, loan or credit card, speak to your lender as soon as possible as they may be able to come up with a more manageable repayment plan.
But if your problems are bigger and you don’t know what to do, there are plenty of debt charities you can contact for free advice. These include Citizens Advice, National Debtline and StepChange. They will be able to review your finances and help you come up with a plan to deal with your debts. What’s more, they’ll treat everything you say in confidence and won’t judge you for being in the situation you’re in.
We show offers we can track - that's not every product on the market...yet. Unless we've said otherwise, products are in no particular order. The terms "best", "top", "cheap" (and variations of these) aren't ratings, though we always explain what's great about a product when we highlight it. This is subject to our terms of use. When you make major financial decisions, consider getting independent financial advice. Always consider your own circumstances when you compare products so you get what's right for you. Most of the data in Finder's comparison tables is provided by Defaqto. In other cases, Finder has sourced data directly from providers.
Was this content helpful to you?
Thank you for your feedback!
To make sure you get accurate and helpful information, this guide has been edited by
Matt McKenna
as part of our
fact-checking process.
Rachel Wait is a freelance journalist and has been writing about personal finance for more than a decade, covering everything from insurance to mortgages. She has written for a range of personal finance websites and national newspapers, including The Observer, The Mail on Sunday, The Sun and the Evening Standard. Rachel is a keen baker in her spare time.
See full bio
Saving for a holiday? A house? Retirement? Budgeting apps could help you get a hold of your finances. Compare the best budgeting apps in the UK using our table.
Is Money Dashboard the right personal finance solution for you? We explore the finance planner and all of the features of a Money Dashboard account. Read our review to get the low down on a popular budgeting app.
Advertiser disclosure
Finder.com is an independent comparison platform and information service that aims to provide you with the tools you need to make better decisions. While we are independent, the offers that appear on this site are from companies from which Finder receives compensation. We may receive compensation from our partners for placement of their products or services. We may also receive compensation if you click on certain links posted on our site. While compensation arrangements may affect the order, position or placement of product information, it doesn't influence our assessment of those products. Please don't interpret the order in which products appear on our Site as any endorsement or recommendation from us. Finder compares a wide range of products, providers and services but we don't provide information on all available products, providers or services. Please appreciate that there may be other options available to you than the products, providers or services covered by our service.
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
How likely would you be to recommend Finder to a friend or colleague?
0
1
2
3
4
5
6
7
8
9
10
Very UnlikelyExtremely Likely
Required
Thank you for your feedback.
Our goal is to create the best possible product, and your thoughts, ideas and suggestions play a major role in helping us identify opportunities to improve.
