A Step-By Step Guide To Saving Money Each Month

In an ideal world, financial advisers recommend that you should be saving at least 20% of your monthly salary for the future, that said, often it’s not possible.

It’s not, not possible because you don’t earn enough, it’s because you don’t plan, you waste money on stupid things, and you don’t know how to save money for the future.

Spending Smartly

The number one rule for saving money for the future is to spend less than you earn. But while spending less than you make, you need to think about saving smartly. It is simply not worth compromising on the essential things to try and save money, as it will end up costing you more in the long run.

As an example, watch out you eat correctly and take the exercise during the week, otherwise, you’ll end up in trouble by spending more on health and medical expenses.


The first thing you need to do with any saving plan is to decide on your budgets. This means you need to think about your fixed costs such as housing, food shopping and any other fixed expenses.

After you have reduced these as much as possible, the focus should then be on your variable costs and where you can make savings here.

What Are Your Fixed Expenses?

Below are my fixed expenses that I’ve entered into my budget each month. While I have tried to make them as cheap as possible, they are fixed expenses that you cannot do without.

  • Housing – My mortgage costs 1.99% for a 5-year fixed rate of 75% LTV mortgage. This is about the best deal you can get in the UK today. Possibly it could be an extra 0.25% cheaper, but the cost of moving my mortgage would outweigh the savings.
  • Gas, Electricity, Water, Council Tax – In the UK I need to pay these fixed costs every month to run my house. If you live in a flat, you might also have to pay a service charge, while if you don’t own the land, potentially you might need to pay land charges
  • Buildings and Contents Insurance – We discussed this above, remember the small things. Without insurance, you’re at serious risk. Imagine if you house burn’t down and you lost everything. How would you replace it?
  • Food Shopping – We try to avoid shopping at M&S Food or Waitrose, however, a weekly shop is in my fixed costs in my budget process
  • Travel – I work from home during the week, but there are times when I need to go to meetings or the office and thus have to travel
  • Car Payments / Fuel expense – can you make this cheaper, smaller car

Variable Cost’s

These are cost’s that you don’t have to spend each Month. Plan and priorities are the key. Remember, if you saved £100 per Month (Sky TV, Netflix Subscription, Gym Membership = £100 Per Month) between the ages of 23 and 55, you’d have 280,000 in cash in your bank account with a 10% growth rate.

  • Entertainment – I try to take the wife out for dinner once a week. This doesn’t mean that we go to the most expensive restaurant, but it’s nice to do something each week together.
  • Sports – I try not to waste money on sports, however, if there is a free class at my local sports centre, I will join.
  • Hobbies – I try to have free hobbies or buy second-hand.
  • Shopping – watch out what you’re buying, I once had a friend who bought clothes they never used.
  • Television – Netflix is £10 per Month, Sky TV is around £38, and the list goes on.
  • Broadband – Yes, I pay for decent broadband, but this is my one variable cost each Month that I cannot do without.
  • Gym membership – do you need to spend £100 per Month for the latest gym

Save For Holiday & Save For Emergency

There are two things in my budget that I save for each Month. I save £100 per Month into an emergency fund, and I save £200 per Month into a holiday fund to take the family on holiday each year.

  • Holidays – Make sure you plan your holiday in advance as it’s often much cheaper if you book in advance and make sure you avoid public holidays such as Christmas or New Year.
  • Emergency Fund – so that if I lose my job or have serious problems, I have cash-on-hand, that is not tucked away in the stock-market to use where necessary.

Things Not to Do If You Want To Save Money

  • Starbucks – That coffee from Starbucks each day really adds up. A Caffe Americano (Venti) is £2.45 in the UK today. If you have one coffee each day, its 49 per month or 124,182 if you invested it each month and it grew by 10% each year from the age of 23 to 55.
  • Don’t smoke – a packet of cigarettes cost’s an average of £10.80. If you smoke a packet each day, that’s 324 per month or 821,125 if you invested it each month and it grew by 10% each year from the age of 23 to 55.
  • Don’t buy lunch, make your lunch at home and take it to work. I used to spend £10 per day eating at the office canteen. The food was terrible, and worse still, it wasn’t very good for you. Today, I make my own and save £5 per day – that’s £253,434 if I invested it from the age of 23 to 55.
  • Don’t spend money on snacks and soda at the company vending machine. I often spend £2 in the vending machine, but even this adds up to over £100K if you let it grow from the age of 23 to 55

Things to do

  • Credit Cards – You need to watch out for this one, but try to buy things on your credit card and either collected the points or look for a cash-back credit card. However, make sure you pay the credit card off at the end of the month. Credit card have notoriously high-interest rate charges, and the last thing you need is to waste money on this type of debt.
  • Loyalty Points – Every company these days has a loyalty point program designed to save you money.
  • Discount Apps – such as Groupon and Wowcher.co.uk have some cracking deals.

What If There is Nothing Left At The End of The Month

This is where your side-jobs come into play. We have all been in a position where are monthly expenses take our entire salary, but few very take the additional step of a second income to save for the future.


Save What’s Left and most importantly, Invest it to


TheRetirementBlog.co.uk is written by David Jacobs who is on a quest to retire early and get out of the rat race. David is a financial expert who lives for early retirement. Follow his journey making money, saving and investing to retire early and get the best out of his retirement.

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