Does Cutting Back Boost Your Finances?
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The research from Nielsen also found a spike in people reducing spending compared to a year ago when only two in five people declared they were cutting back.
Favourite ways to cut costs
- Switch grocery brands – 30%
- Save on gas and electricity – 27%
- Spend less on new clothes – 25%
- Cut down on takeaways – 25%
- Spend less on home entertainment – 19%
- Have fewer holidays – 16%
- Delay upgrading technology – 14%
- Find better deals on loans, insurance, credit cards etc – 13%
- Buy less or cheaper alcohol – 13%
- Delay replacing major household items – 13%
Small savings versus big savings
But do these activities make any real difference to your finances?
The short answer is yes – these are all solid ways to pare back your outgoings, and big savings can definitely be found. However, the key to successfully managing your money is to get a clear understanding of your finances. Starting a budget can really help you see the true state of things, and from there you can use it to identify the spending areas you might need to tackle – whether big one-off costs, or regular expenses which mount up over the weeks, months and years.
Some of the examples listed in the research are examples of making small savings, perhaps only a few pennies or pounds. Yet they’re proof that every little counts. Reducing a supermarket shopping trolley by £10 every week adds up to £520 a year, and cutting out one takeaway a month can easily save a family more than £200 a year.
But there are also some big savings that can be made with a couple of one-off changes. Switching energy, for example, can save the average household £300 a year. Likewise, moving bank could be rewarded with a £100 incentive – as well as potential benefits such as lower overdraft fees and interest on savings.
Going without is better than getting into debt
These switching activities are undoubtedly more appealing than simply going without – something you’d be doing if you don’t go on holiday in order to save money. But if you can’t afford things like the latest technology or going away, then it’s important you do choose to delay splashing out until you do have the available money.
Choosing to borrow money through loans or credit cards for big things like these is unlikely to be cheap. 0% purchase credit cards can make it more affordable – if you have a plan to pay off the debt.
However, with most borrowing, you’re going to get charged interest. This interest can quickly make any savings you make elsewhere redundant. Plus there’s the risk that you’ll be hit with penalties if your situation changes and you struggle to repay the money. Together it makes it easier for you to fall into even deeper debt.
If you would like to talk about any of the issues in this article or need more general help with your finances, please get in touch with us.