How to save £5000 a year without too much effort


How to save £5000 a year without too much effort might seem impossible, but it can be done. People often set themselves up for failure by setting unrealistic goals that require a complete change in lifestyle and habits. Small changes to your money habits can make all the difference and can improve your financial health in the long run.

Snowball your debt

There’s no point trying to make your money work harder for you if you have expensive debt (credit cards, loans etc) and no emergency savings to hand. That’s because the interest you owe on debt will accumulate faster than the interest earned on your savings or returns on investments.  Especially now with interest rates so high! The first thing to do is to tackle your debt and put in place a clear and consistent plan for clearing it.

The debt snowball method is a debt reduction strategy where you pay off debt in order of the smallest to the largest, gaining momentum as you wipe out each balance. When the smallest debt is paid in full, you roll the money you were paying on that debt into the next smallest balance. And so on. It works because you make progress quicker and wiping out each balance gives you a huge sense of satisfaction. Here’s how to do it:

1 List your debts from smallest to largest regardless of interest rate.
2 Make minimum payments on all your debts except the smallest.
3 Pay as much as possible on your smallest debt.
4 Repeat until each debt is paid in full.

Savings: huge £££

Utility bills

After your mortgage or rent, the next biggest expense will be your utility bills, so it pays to check that you’re on the best tariffs and rates. The energy price cap rises from 1st January 2024 so this could make a big difference to your outgoings. It will take a bit of prep and effort to gather all your bills and have information to hand so you can easily compare, but it’s worth it.

January is usually a quiet month for most of us after the heavy expense of the festive season, so use the down time to review your bills and use online comparison tools to look for cheaper options from anything from your mobile phone operator to your contents insurance.  Assuming that you’ll knock off £50 to £100 a year on each utility, you could save yourself around £400 a year.

Savings: £400

Food shopping

Many of us have got into the habit of shopping for food on the way home from work, but it ends up costing more unless you’re disciplined enough to shop late in the evening to pick up the reduced bargains. Even if you do shop once a week, you probably end up throwing food away at the end of the week.

To avoid wasting money and food, get into the habit of visualising your week and planning your meals accordingly. Plan realistic meals around your lifestyle that you’ll have the time and patience to cook, write a shopping list and stick to it religiously! Monitor what you’ve been throwing away and adjust your shopping list as necessary. By sticking to a meal plan and a shopping list and avoiding waste, you should be able to trim £50 to £100 from your monthly shopping bill.

Savings: £1200

Monitor your monthlies

Direct debits and monthly subscriptions can easily add up and eat into your monthly income without you noticing. You may have started off with subscriptions to Netflix and Spotify, but you’ve probably picked up a clutch of subscriptions ranging from fitness apps to food and beauty box subscriptions.

As they’re small, regular amounts you don’t notice them coming out of your account, but together they add up to a sizeable amount. The average monthly spend on apps and subscriptions is £50, so you could save yourself around £600 a year on average. Review your apps once every few months and cancel any subscriptions you don’t actively use and channel the money into your savings instead – make sure you set up a standing order so you don’t forget to transfer the money!

Savings: £600

Coffee, lunches, deliveroos and ubers

A daily coffee habit can cost you circa £20 a week and over the year that adds up to £1,040. Lunches are another unnecessary expense. Let’s say you spend £5 a day on lunch, five days a week, 48 weeks a year. That’s another £1,200. We all like to indulge in a take-away now and again, but if you’re also ordering them mid-week when you can’t be bothered to cook (we’ve all done it) then it’s neither good for your health nor your wallet.

Using cheap uber rides to get around town might be convenient, but they’re probably soaking up quite a bit of your money.  Walk or take public transport at least twice a month and you could save £25 a month or £300 a year.

You get my drift. I’m not suggesting you stop all of these convenient but expensive habits over night, but you could pick one day a week, maybe a Monday, to forgo the coffee and take a home-made lunch to work. Doing it for just one day a week could save you around £400 a year that could go into your rainy day or sunny day savings. Start off with one day and week, and work your way up gradually.

Savings: £2,940

Grand total: £5,140

Sunny or runny days

These little tricks will help you put aside money for rainy days or even save towards expensive holidays or that expensive camera you always wanted. Once you’ve got a rainy-day fund set aside, you can begin to think about investing for the long term.

Investing can seem like a foreign country. If you’d like to have a go, take a look at our investment platform calculator to find a platform that suits your particular needs and circumstances.  For example, you might be a novice investor who wants a simple site with lots of guides and recommended fund lists.

Equally, you might to want it hand over to the professionals and get proper advice. If that doesn’t float your boat, you could leave the decision making to a digital investing apps. Use our digital investing comparison tool to find the right one for you.  If you’re still not sure about what to do, check out our guides and videos for more information.

Photo by Philip Veater on Unsplash

First published in January 2020.