How on earth are you supposed to save money for the future when the basics of living – rent, food, travel – suck up all your earnings?
How I Save aims to explore that, looking inside a different person’s finances each week. We look at the nitty-gritty of what they earn, what they save, and how exactly they’re spending, then bring in some expert advice they (and we) can use to save more money.
Last week we chatted to a man who earns £150,000 a year and has £143,000 saved – but still scrimps on a loaf of bread.
This time we have another pretty brilliant saver, but this time on a more relatable salary.
Sarah (not her real name, as people can be nasty when it comes to money) is a 30-year-old product development manager living in High Wycombe and working in London. She has £34,500 saved up. How did she do it?
How Sarah saves:
I earn £28,000 a year plus a £1,000 bonus. In my savings account right now I have £34,500 (spread between standard savings accounts and ISAs).
For a couple of years I lived in a shared flat in London and walked to work, which made life a lot cheaper. Back then I was able to save almost £10,000 a year. Now I can only save about half of that.
About four years ago when I started working full time, I had pretty much £0. I had no loans or debts, but no savings either. I shared a room with my boyfriend in a flat share, so my portion of rent and bills only came to about £450 per month. Life is definitely cheaper as a couple!
I walked to work, so did not have any transport costs and I’ve always had either a cheap £5 a month phone contract or a cheap pay as you go sim.
Another big factor that has saved me thousands of pounds over the years is the fact that I don’t drink alcohol. My monthly grocery bill is under £100 and I hardly ever spend more than £20 on a meal out.
Even though my starting salary was only £22,000, my lifestyle made it possible to save almost two thirds of my salary, which amounted to about £10,000 per year.
About one and a half years ago I moved out of London and now rent a two bed flat with my fiancé. Consequently my life has become a lot more expensive.
My half of rent and bills is about £600, but I also have to fork out about £367 per month on transport (although I do buy an annual train pass to get the cheapest deal).
In addition I have joined a gym, which sets me back another £36 per month. I’m quite happy to spend the extra money on rent and the gym to improve my general quality of life and fitness, but the transport cost is an absolute rip-off and something I am definitely looking to cut back on in the future.
I’m saving for a house, maternity leave and retirement.
I don’t have a target per se and next year I will be on maternity leave, which will make a dent in my savings. The year after, I am hoping to buy a house, so after that I will have to start saving from scratch again. As the property prices in this part of the country are insane, I do believe I’ll need to have at least £50,000 saved up before I can buy anything.
I think the main budgeting technique I’d recommend is to first put aside the money for all your necessary expenses as well as move money into any savings accounts/ISAs. Only then can you spend some money on ‘unnecessary’ things like new clothes, eating out or entertainment. Also, never use a credit card unless you are going to pay it back in full every month!
The main way I save is by transferring a set amount into a savings account/ISA each month. I only eat out about twice a month, all other meals I cook at home. I also think quite carefully before making purchases. I live with my fiancé, so I pay half of the rent and bills.
I would say that I am quite good with money and relatively frugal by nature, so find saving easy.
I like to play it safe, so would never invest in anything risky, but have recently bitten the bullet and started small monthly investments into an index fund (Warren Buffett style).
I also subscribe to the weekly MSE newsletter, which has good tips on all things related to money and which I highly recommend.
I struggle with saving mainly because transport is so expensive (I buy an annual train pass). I also travel back to my home country and go on holidays several times a year.
How Sarah spends:
Monthly expenses:
- Rent £497.50
- Train £367
- Electricity £25
- Water £10
- Gym £36
- Council tax £65
- Internet £12.50
- Netflix £10
A week of spending:
Monday: £30 on two theatre tickets as a birthday present.
Tuesday: 90p on a pack of rice.
Wednesday: £3.80 on dinner supplies.
Thursday: £3.99 on a book.
Friday: £16.50 on a food shop.
Saturday: £8 at a farmers’ market on lunch, £4.80 at Boots.
Sunday: £8.80 on a food shop.
Total spent this week: £71.99
What we can learn from Sarah:
We spoke to the experts over at money tracking app Cleo to find out what we can learn from Sarah.
Note: the advice featured is specific to one individual and doesn’t constitute financial advice, especially for a London budget.
It took a few seconds to compute that: living in London allowed you to save more money?
You’re a wizard, and you give hope to us all.
How to pull a Sarah:
Other than moving to London, giving up alcohol and taking up a fiancé, there are some habits we can hijack from Sarah’s diary.
Sarah’s monthly spend is high, which is great.
Monthly spends: 54%
Saving: 36%
Free spend: 17%
She’s got a consistent groceries budget and has managed to also somehow make her fun spends into bills. With this number as fixed as possible, she’s doesn’t really have to worry about her daily spend at all.
Saving money doesn’t mean cutting out everything you love. It just means trying to put a real number next to them.
Where Sarah has two restaurant meals booked in each month, switch in your luxury spends. This means confronting how much you actually spend, then figuring out how many times you can afford to do it.
This applies to shopping, nights out, drinks after work. Anything that makes the grey grind of life less miserable for you.
Bonus: scheduling a couple in will help you a) look forward to them and b) let you enjoy them guilt free.
For the planning-averse: this is still transferable (ish). Set aside a fixed amount that you can ‘waste’ each week and the number of times you can do it. Look at it like: three times a week I can blow £15 on something I’ll enjoy.
The Sarah challenge:
Sarah’s impulse control is wild. I don’t know about you, but we don’t know many people who top off their Tuesdays with a 90p bag of rice.
There are some luxe spends in here too (books farmers market lunch etc.) but the key takeaway is how rarely Sarah whips out her card. What would happen if you literally tried to only buy one thing a day?
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