Beginner's guide to Smart Spending

Smart Spending is about living within your means, saving for short and long-term goals, and making a plan to pay off any debts.

Where does the money go?

If you’re spending more each month than you are earning, there are probably some things you could cut out that you wouldn’t really miss. Small amounts, for items like magazines, ready-made sandwiches or takeaways, can add up to surprising amount over a month.

Top tips

Cancel any direct debits you no longer want or need.

Keep a spending diary to see exactly where the money is going. If you make a note of EVERTHING you spend for at least a month, you’ll get a good picture of your spending, and probably a few surprises. Why not pop into MoneyWorks and pick up a spending diary.

Remember to include online purchases – so easy to make and forget about – until you see your bank statement. Once you have a better picture of your spending, take a look at our money saving tips to see how you can make savings.

Making some small changes to your day-to-day spending can make a big difference to your budget in the long run.

Paying off loans and credit cards

To clear your debts, it usually makes sense to pay off the debt that charges the highest rate of interest first.

Different debts charge different interest rates:

•    Store cards often charge the highest interest rates
•    Credit cards 
•    Personal loans from the bank, normally charge a lower rate of interest than credit or store cards

But take care - it is important you don’t break the terms of any of your agreements. So even if you’re focusing on paying off another debt, you must pay at least the monthly minimum required on any credit cards or loan agreements.

Setting up a budget

If you want to make your money work for you, a budget is a really good way to start.

It’s simply a record of:
•    Money coming in, such as wages, pensions, benefits
•    Money going out, such as rent or mortgage, insurance, council tax, living expenses, one-off or unexpected costs

Top tip

Make sure you include one-off expenses like car tax and Christmas presents in your budget, and tax and National Insurance if you’re self-employed.

An online budget planner is an easy way to work it all out. 

This will help you record your incomings and outgoings. It then adds and analyses your figures, breaking down your spending into:

•    Household bills
•    Living costs
•    Financial products
•    Family and friends
•    Travel
•    Leisure

Using our the Budget Planner Tool you can save your results and update them at any time.

Or you can set up a budget on a spreadsheet on your computer or on paper. Your bank or building society may also have an online budgeting tool which takes information directly from your transactions.

Set a savings goal

Setting a savings goal will really help you prioritise saving and it could be faster than you think! If you  really want that deposit for a home, or save enough for a dream holiday, set your goal, work out how much you can save each month and get started. 

Step 1 – Name your goal

What do you want to save for ? Once you set your goal you’ll reach it faster. If you’re new to saving, try starting with a small goal.

Even if you’re just saving for a rainy day, you’re more likely to succeed if you have a goal amount in mind. Grab a pen and write down your goal.

Step 2 – Work out how much to save each month

It depends on the price of your goal, how much spare cash you have at the end of each month, and how soon you want to reach your goal.

For example if you were saving for a £400 laptop. You could save £100 a month for 4 months, or £50 a month for 8 months. It’s a balance between what you can afford and how long you want to save for.

Step 3 – Set up a standing order

Give your account a name that inspires you to save – like ‘UK road trip,’ ‘Steve and Jackie’s wedding’ or ‘First home’. 

Strike while the iron’s hot! Open a straightforward instant access savings account. It may be easiest to do this with your own bank. Speak to your bank about different types of savings accounts

Set up a regular payment today to transfer the amount you want to save into your savings account each month.

What to do
•    Open a savings account if you don’t already have one – go online or pop into your bank.
•    Set up a regular payment into your savings account every month. You can set up a standing order instruction to your bank.

Comparison websites are a good starting point for anyone trying to find a savings account tailored to their needs.

Some of the websites below have useful information for comparing savings accounts:
•    Money Saving Expert
•    Money Supermarket

Remember:
•    Comparison websites won’t all give you the same results, so make sure you use more than one site before making a decision.
•    It is also important to do some research into the type of product and features you need before making a purchase or changing supplier.

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