A new year brings a new set of resolutions, and for many people this is the year that they want to scale back their spending and bolster their savings. In other words, they want to go on a financial ‘diet’.
Luckily, there is no shortage of wacky and innovative advice out there for savers who want to make the most of their cash this year.
So, if you have resolved to be better with your money this year, read on and see if one of these financial ‘diets’ can work for you…
This financial tool has been around for a couple of years now, but it has finally gone mainstream thanks to the soaring popularity of so-called ‘round-up’ apps. The likes of MoneyBox, Monzo and Revolut have made it incredibly easy for consumers to save their small change by rounding up each and every purchase to the nearest pound.
So for instance, instead of spending £3.95 on a sandwich, you would be charged £4, with 5p going straight into your savings account. This may not seem like much, but all of this spare change can add up over time.
And by leaving your round-ups in an online savings account without making any withdrawals, you can take advantage of compound interest and build up a decent nest egg over time. And the best bit is, the service is completely automated so you don’t have to do anything.
2. Resolution money
Smokers are often told to put aside the money they would have spent on cigarettes each week and add it to their savings account instead. ‘Resolution’ money is an extension of this idea, where you give up a bad habit and actively save that money instead.
For instance, if you decided to go vegan this year, you might set aside a couple of pounds every time you do your weekly shop, to represent the extra money that you would have spent on meat or fish.
When you start to notice your savings grow, you will be even more convinced that your resolution was worthwhile.
In the contactless era, it is incredibly easy to make small impulse purchases on a near-daily basis – all you have to do is whip out your phone. But these seemingly inconsequential spends add up quickly, leaving you wondering where all your money has disappeared to at the end of the month.
If you struggle to keep your impulse spending under control, start carrying cash – and only cash. Work out how much ‘walking around’ money you can afford to carry, then withdraw this amount at the start of the week and use it cash to make those little purchases when need be.
By using cash, you can keep better track of your spending, and at the end of the month you will be able to increase your savings stash as a result.
4. The 1p savings challenge
This challenge has taken off on social media this year, and it is one of the most attainable financial ‘diets’ out there.
You simply save 1p on the first day of every month, 2p on the second day, 3p on the third day, and so on. At the end of each month, the challenge resets and you start fresh with a new 1p saving on the first day of the next month. The beauty of this system is that you will never have to save more than 31p a day, but you can still save a surprising amount.
Devotees of the challenge claim that they have been able to save more than £650 per year without changing their lifestyle at all. You can save even more if you are able to save this money in an inflation-beating savings account or an ISA.
5. 365 challenge
This is similar to the 1p challenge, but with a weekly rotation, and the savings are in pounds not pennies.
The idea is that you save £1 every Sunday, £2 every Monday, £3 every Tuesday, etc. By the end of each week, you will have saved £28. By the end of one year, you will have put away a massive £1,456, before interest and tax-free savings.