In this article, we want to show you how to save £20,000 in a year in the UK, introducing some helpful tips along the way that will guide you to achieving your ambitious savings target.
Defining Your Goal
No matter what you’re hoping to achieve in life, goal setting is super important, and this is particularly true when it comes to working towards your financial objectives. While it might seem like saving £20,000 is tough, things become a little bit easier when you break it down into smaller steps.
For instance, to save £20,000 in a year in the UK, you need to put away £1,667 per month, or £385 per week. This immediately seems more doable for most people, and it helps you create a budget to reflect your savings aspirations.
Establishing a personal budget is essential if you’re serious about meeting your annual savings goal, as you need to be fully aware of your incomings and outgoings every month. A budget also helps you to identify areas of your expenditure where you can cut back.
We have several helpful tools to help you reign in your spending, and you can use the HyperJar kids debit card to monitor your child’s spending and to help them manage their money better.
By defining your goal and creating a budget, you’re already well on your way to achieving your ambitious saving goals. Let’s take a closer look at how you can establish a plan to help you save enough money away each month to end the year with £20,000 in the bank.
Making a Plan
As the saying goes, if you fail to plan, you should plan to fail! This couldn’t be more true for your finances, so a comprehensive plan goes a long way. Below, we introduce some helpful tips that will enable you to put together a comprehensive savings plan to meet your target this year:
Determine your monthly take-home pay
The best place to begin is to determine your monthly take-home pay. You need to be as specific as you can here and be sure to deduct taxes, student loans, and any other immediate outgoing expenses.
You then know precisely how much money you have available to cater for your monthly expenses and how much is available to put aside for savings.
Figure out your monthly expenses
Next, figure out what your non-negotiable monthly expenses are. Things like rent or mortgage payments, debt repayments, food budget, household bills, and transport fall under the “essentials” category.
Calculate precisely how much you need to allocate to these essentials, then make a list of “non-essentials” - things like gym memberships, football season tickets, entertainment, eating out, etc.
Having essential and non-essential budget categories will help you as you look to save on your expenses to save more money - more on this shortly.
Create a budget
Now that you’re clear about your income and expenditure, it’s time to put together an actual budget that you can rely on throughout the year. A budget is a way of allocating a sufficient amount of your income to cover your core expenses. What’s left over can contribute to your non-essential expenses and your savings pot.
At this stage, you can utilise the HyperJar Payment Control Options, a helpful feature for creating your budget. Our payment controls put you firmly in charge of what you can and can’t spend money on and ensure that you’re disciplined and committed to sticking to your budget.
It’s now time to start saving. The best way to do this is to automatically transfer a fixed percentage of your monthly income into your savings account. As such, this becomes one of your “essential” expenses and is a great way to achieve consistency. HyperJar Savings Jars are a beneficial tool when you start saving, as they foster good habits and help you work towards your monthly targets.
Once the fundamentals are in place, monitoring and reviewing your progress throughout the year is important. You can adjust your budget and saving strategy to free up money at different stages of the year. It helps to look for opportunities to cut back on unnecessary spending, and if you want to smash your savings target, it’s also helpful to look for ways of increasing your income, perhaps with a side hustle.
Review your progress regularly
The final step in savings planning is reviewing your progress regularly. You can set up a simple spreadsheet to track your income and expenses and to ensure that your purchases are within budget.
This gives you the confidence that you’re on the right track and provides you with a great sense of achievement when you reach your milestones. As a result, it helps you retain motivation as you work towards that magic number.
Automating your savings
Something that many people find helpful when budgeting is the process of automating their savings. We’ve touched upon this already, but automating your savings means that the money leaves your current account as an essential expense.
This is a great habit to get into and will help you meet your target. The following tips will help you as you automate your savings this year:
● Pay yourself first - be it from an employer or via your invoices as a self-employed professional - ensure that a payment leaves your current account and goes directly into your savings. While you can set up a direct debit for this, you can also do it manually if you prefer to retain control over the amount you send to your savings account.
● Review your savings contributions after a couple of months and look for opportunities to increase the amount you save. As we explain below, you could always cut back on some non-essential items to help you.
Cutting Back on Expenses
Cutting back on expenses is an excellent way to help you save £20,000 per year, but it’s far from easy. However, it’s not impossible, and you can use the following tips to add more money to your monthly savings pot.
Cut back on your non-essential expenses
Cutting back on non-essentials requires discipline and a lot of effort and everyone is different, so you need to think carefully about what you can spend less on. Things like holidays, eating out at restaurants, buying new clothes, and gym memberships are all non-essential items that you can cut back on to save more money this year.
Live below your means
Wealthy people are brilliant at living below their means. Even if you land a higher-paying job, it doesn’t mean you should automatically increase your standard of living to reflect your new paycheck.
Instead, you should use the additional money to save and grow your wealth over a longer period. A great strategy is to live below your means and to invest the difference, as investing is the best way to grow your wealth.
HyperJar’s Annual Growth Rate is a way of being rewarded for your annual savings and will help you to stay motivated as you cut your expenses this year.
If you want to save £20,000 annually in the UK, perhaps the most important attribute is discipline. You also need the willpower to say no and stop spending frivolously, even when your friends and family encourage you to do so!
Increase Your Income
Our final tip is an important one - if you want to boost your savings this year, you can look at ways of increasing your income. But how do you go about it?
Of course, we would all love for our boss to turn around and offer us a six-figure salary, but it’s not necessarily going to happen! If you think you can earn more than you currently do, look at the market for other jobs in your industry that you can apply for.
Alternatively, start a side hustle or work a weekend job to earn some extra income that you can save. What’s more, when you’re working, you’re less likely to spend, so any extra cash you bring in will be easier to save.
Saving £20,000 per year in the UK isn’t easy, but it’s certainly achievable. You can follow the detailed steps introduced in this article to help you achieve your saving goals this year and work towards your financial future.
Be sure to check out HyperJar’s pre-paid debit card to learn more about how it can improve your financial management this coming year.