How to Cut Costs at Home
26.10.2020 by Jack H
Do you struggle to make ends meet every month? Are you fed up with working hard and not having anything to show for it? If yes, you are far from alone.
In fact, people in the UK owed a colossal £1,680 billion at the end of January 2020, with the average household debt, including mortgages, being £60,363.
From setting a budget (and sticking to it!) to determining wants vs. needs and consolidating your debts into one easy monthly payment, keep reading to discover how you can cut costs at home. By the end, you should be able to pay all your bills and even have some money left over for a rainy day.
Evaluate your finances
If you are the type of person who doesn’t really know what is going out of your bank account each month, then now is the time for a change. It is impossible to cut costs and start saving if you don’t know exactly what your incomings and outgoings are. Therefore, you need to stop burying your head in the sand and sit down and completely evaluate your finances.
A good place to start is by printing out your last three month’s bank statements and calculating how much money is going out of your bank account each month. You should also make a note of when each amount comes out, especially if you have your payments spread out over the course of the month.
Once you have done this, you now need to evaluate any debts you have. This includes loans, credit cards, and even your overdraft, as you will want to work out ways to make each of these more affordable.
If you are lucky enough to have any savings or investments, make a note of these, plus how much interest you are getting on each and what each one is for.
Finally, it can be a good idea to find out your credit score. You should aim to do this at least on a yearly basis for a number of reasons, but mainly to:
- Prevent fraud
- Check your information is correct
- Keep you focused on paying off your debts
Set a budget
Once you know where you stand with your income and all your outgoings, now is the time to create a manageable budget. If you have tried and failed before to create and stick to a monthly household budget, then there are several key elements that could have led to your downfall:
- Your budget is not realistic
- You don’t pay into a savings account
- You don’t communicate with your partner about your budget
- You are not able to say no when it comes to impulse buys
- You don’t know your spending triggers
- Your budget doesn’t fit your lifestyle
Fortunately, if any of the above reasons apply to your current budgeting practices, then you will be happy to know that you can successfully budget. You just need to make a few adjustments to both your mindset and your ideology in terms of your finances.
There are five main steps to creating a budget for your household:
- Determine your income
- Calculate your expenses
- Work out the difference
- Decide what to do with your disposable income
- Stick to it as a family
It really is that simple.
Determine wants vs. needs
When looking for cost-cutting ideas, this is arguably the one that many households struggle with the most.
Do you need a particular item or service, or do you just want it?
For example, your child’s school shoes no longer fit. Therefore, they need a new pair. However, if your child asks for new shoes because they aren’t the latest design, this is a want.
The same can apply to pretty much every purchase that you make, both individually and as a family. You either need an item, or you simply want it.
Of course, you want to have some consumer joys in life, and there is no harm in occasionally treating yourself to a new jumper or perfume purely because you want to. However, the key is in ensuring that you can afford this indulgence and in making sure that it does not become a habit rather than a sporadic occasion.
A great way to determine whether you really want something or it is just an impulse buy is to wait 24 hours before buying said item. This gives you time to take a breather and reflect about what you actually want. More often than not, the desire to make that purchase may disappear, stopping you from wasting money unnecessarily.
Save on your utilities
Although you may not like it, there are several essential bills that you have to pay each month to keep your home ticking over. These include your gas, electricity, and water rates.
On average, these outgoings tend to take up between 5-10% of your monthly budget, but fortunately, there are several ways in which you can save on your utility bills.
- Compare prices: If you have been with the same electricity, gas, or water provider for some time, you should definitely check to see if you can save money by switching to another company. There are several online tools that can enable you to easily compare utility prices and find out exactly how much you can save a year.
- Purchase energy-efficient appliances: Although this will involve some initial outlay, you can save hundreds a year by switching to more energy-efficient appliances. If you don’t have much money, start by upgrading smaller appliances such as your kettle and toaster.
- Install a smart thermometer: This will allow you to track your usage and have more control over your gas bills.
- Insulate your roof: You can easily shave over £100 off your annual heating bill by ensuring you have the recommended amount of insulation in your roof.
- Use less water: Try having a shower rather than a bath, fill a bowl for washing up rather than letting the tap run and fit a shower timer.
Ditch your overdraft
If you are thinking this is easier said than done, then you are right. Getting out of your overdraft can seem an impossible task, especially if you have been reliant on this money for a long time. That being said, depending on your bank, overdraft fees can be extremely expensive. In fact, although new rules have made it so that overdraft fees are clearer and easier to compare, that doesn’t necessarily mean they have gotten any cheaper.
Therefore, if you are currently using your overdraft, there are two things that you need to do as soon as possible:
- Compare overdraft fees from different banks and switch if necessary
- Become less reliant on your overdraft
The first step is arguably easier than the second, but you will find once your overdraft fees go down, you can get out of your overdraft quicker.
Other ways in which you can ditch your overdraft include:
- Track your spending
- Move your overdraft to a 0% credit card
- Focus on paying off your high-interest debts first
- Use any savings you have to pay off your overdraft
- Stick to your monthly budget
Use your home
If you worked out your budget and your outgoings are more than you incomings, you need to look at ways in which you can bring in more money each month. Fortunately, you don’t need to get a “side hustle” in order to do this.
Instead, why not utilise your home to earn some additional cash?
Depending on your current situation, you could consider renting out a spare room in your home, or if this is not feasible, why not rent out your garage or your parking space? If you live in and around London, you could earn up to £200 a month purely for allowing someone to use your parking space during the week!
Alternatively, if you are going on holiday next year or even just for a weekend away in the UK, you might be able to rent out your home on Airbnb, allowing yourself to earn some much-needed spending money.
Consolidate your debts
If you have a lot of debts, or more specifically, if you have debts that are currently unmanageable, you may want to consider taking out a consolidation loan.
Although you may feel wary about borrowing even more money, if you have multiple debts, each with varying amounts of interest and each one coming out at different times of the month, it can be better, both for your bank balance and your mental health, to have just one manageable loan.
- Benefits of debt consolidation include:
- One simple monthly payment
- Lower interest rates
- An improved credit score
- Less financial stress
- Pay off your debt quicker
Of course, like with any loan or credit, you need to make sure that you can afford the monthly repayments or you risk getting into even more financial difficulty.
Other home cost-cutting ideas include:
- Creating a monthly meal plan
- Using cash rather than your debit card
- Cutting up your credit cards
- Shopping around for the best insurance deals
- Cancelling any unused or unnecessary monthly subscriptions
- Saving on transport by walking, cycling, or car sharing
For money-saving tips and expert advice on how to make the best of your finances take a look at our other money saving tips articles.