Join us as we uncover the secrets of becoming financially savvy, looking at how you could be spending smarter to help you save more.
The start of a new year can mean getting your financial affairs in order, particularly after an expensive holiday season.
In our last blog, we tackled the basics of strengthening your finances so that you can be more resilient through tough periods.
This time, we’re exploring how to become more financially savvy—essentially, making smarter choices when it comes to spending. Because it's not just about saving pennies; it's about understanding the bigger picture of how the economy works and letting that guide your decisions.
Join us as we uncover the secrets of financial savviness, looking at how you could be spending smarter to help you save more.
Understand the benefits of financial planning
Planning your finances doesn’t have to be boring. You can start by laying out your financial goals, whether that’s a dream holiday, a new home, or just having something left over in your bank at the end of the month. Think about how much money you need to achieve these goals, and how you want to go about meeting them. Then you can start to create a plan, which should be closely monitored and altered to help you stay on track regardless of whatever life throws your way.
For example, if you need to save £1,000, you might choose to put aside £100 per month for 10 months. But if that’s too much and doesn’t fit within a realistic monthly budget, simply extend your timeline and plan to put aside £50 or even £20 per month instead rather than not starting at all.
Maybe some months you won’t be able to put aside your chosen amount. Then you will need to decide whether you make it up over the coming months, or simply delay your timeline by a month (or more) to help your resilience recover.
It can sound daunting. But saving a bit each month makes it much easier to achieve your financial goals than paying out lump sums from one paycheque.
One key trick is to try and separate your savings from your day-to-day banking if you want them to build up. Never has ‘out of sight, out of mind’ been more useful for you than in this instance. If you can see your savings each time you log in to your bank account and it’s really easy to touch them then it’ll almost certainly happen more than you want it to.
Once you know how much money you want to save based on your long-term goals, it’s time to consider your current spending. It might seem obvious, but taking a closer look at your monthly outgoings is the simplest way to cut down on any unnecessary spending.
Look at where you might be wasting money: Do you end up throwing away fresh groceries that go uneaten? Do you catch the bus or a taxi when you can easily walk? Do you buy unnecessary things when you shop in stores that could be cut down if you ordered online instead? Or - the other way around - is it too easy to order online without the hassle of going to the shops?
We all like to invest in small treats for ourselves and cutting out all purchases that bring you joy isn’t the key to financial savviness. But the chances are, taking a good look at your spending will highlight at least one area where you could be saving pennies or pounds each month. And every little bit adds up when it comes to achieving your financial goals.
You could also consider where you shop. There could be cheaper options available, you might buy things you don’t truly need, or you may buy too much and end up giving or throwing it away.
Changing your mindset to minimise waste can automatically lead to less spending. And when you do find that you’ve got more than you need, look online for platforms where you can sell things to increase your savings or spending money. For example, if you need to spend money on new clothes, do you have old ones you could sell to help increase your funds without impacting your savings goals? And whilst you’re selling remember that buying from those same sites is likely to save you a fortune and be much better environmentally too than buying new.
Know the market
The Bank of England plays a major role in maintaining the UK's financial stability, guarding the value of the nation’s money by keeping prices stable. Being financially savvy involves understanding the market to help inform your decision-making. Therefore, keeping tabs on the economy's performance and future projections, and what they might mean for you is key.
In the news, you’ve probably heard lots about high-interest rates. This is because it affects people who are borrowing money meaning that they have to pay back a higher percentage of what they’ve borrowed. If you’re prepared for this then you can put yourself in a stronger position when it comes to borrowing needs such as remortgaging, or personal lending. For example, knowing interest rates have gone up could prompt you to check out the interest rate on your credit card and then take action to reduce the rate with a lower interest option.
Equally, if you’re saving, high-interest rates can work in your favour, as you’ll find savings accounts and other options pay back a higher percentage of what you have put away.
Staying informed about political developments is equally important, as the political landscape influences decisions made by banks about interest rates and lending. Take the time to gain an understanding of interest rates and credit scores, as this will ultimately help you make better financial decisions even if you’re not borrowing.
A good credit score is viewed highly by banks. If you ever do need a loan, for example, to buy a home through a mortgage, then a favourable credit score will be essential for securing an approval. On the other hand, a poor credit score – accrued by unpaid debts – will make it harder for you to take out loans and credit as you will be seen as being high-risk.
Make your money go further
For 25 years, Great Western Credit Union has been helping to build financial resilience across the South West. We offer fair and affordable credit to over 18,000 people, from Bristol to Bournemouth, to Swindon to Yeovil.
Alongside these services, we aim to help people develop better saving habits. We recently relaunched our high-interest, ethical Cash ISA, to help members increase their savings whilst also giving their local economy a boost. And when members use this ISA, it allows us to offer fair loans to local people who need credit but may struggle to borrow affordably elsewhere.
We also have our Money@Work scheme that enables employers to provide financial help to their employees through payroll services. By offering a wide range of options, we empower borrowers to break free from debt and enhance their financial wellness.