Your income is your primary tool for building wealth, but if you have no money left over at the end of the month, you’re not building wealth. Some things are necessary monthly expenses, like your mortgage payment or car finance payment. But other costs like Netflix and subscriptions to magazines or news sites can be cut back on or cancelled without harming your life.
If you want to go rice and beans, beans and rice way of living to build maximum wealth, this guide isn’t for you. This guide is for the average person who doesn’t want to cut back on every expense and still wants to live a comfortable lifestyle.
Cut back on your food bill
Watching where your money is going every month is essential. The average person spends a lot more on food than they realise. Reducing your food bill is one of the easiest ways to save money, and once you do it, you won’t want to go back. Spending just £5 a day at lunchtime doesn’t sound like a lot on a day-to-day basis but added up it’s around £100 a month.
Buying all of your produce in bulk and making your meals will dramatically reduce your monthly expenses on food. There are plenty of pre-made meal plans around with 7-day or 14-day meal plans to give you various dishes.
If you’re happy eating the same thing every day, having a menu that you stick to for each week is a great way to save money. Buy all your ingredients on one day and cook them up at home over the weekend, making sure some meals are leftovers for lunch the following week.
Reducing your monthly subscriptions and bills
Monthly bills can slowly creep up over the years, therefore reviewing your monthly subscriptions and bills is essential. The average person pays around £40 a month to various online streaming services. On top of that, they pay for magazines and news sites every month. Cutting out these subscriptions can save you hundreds of pounds a year.
Utilities such as electricity, gas, and broadband can eventually become more expensive once the original contract ends. Some broadband providers are worse than others for price hikes. Earlier this year, BT and EE hit their customers with a 4.5% increase across every tariff. Other Broadband providers part of the BT network, such as TalkTalk and PlusNet, have also increased their tariffs. Comparing your broadband deal every year is a handy way of seeing if you can save money. Some broadband providers offer no-contract broadband so you can avoid getting stuck in a financial agreement that has the potential to increase
You should also compare insurances such as car, contents, and life insurances to see if you can get a better policy for the following year.
Create a budget and set goals
Creating a budget for your monthly salary is an excellent way of ensuring an exact percentage of your income is going towards your financial goals. For example, a simple yet effective rule to follow is to commit 15% of your income to investments and retirement. A small percentage of your income means that you could set aside an extra £200 a month towards investments that add up to a considerable amount over several years.
Decide on your investment goals for retirement and work towards them. If you want to retire within 10-15 years, it makes sense not to save the maximum amount of money now but instead to invest a small amount to achieve your aims later. A simple rule of thumb is if you want 40% of your retirement pension income, then invest 6% (40% X 1.05).
With your monthly outgoings reduced and your financial goals set, you will be in a solid place to start saving for investments and ultimately retiring. If you’re a young 20 something-year-old, it might sound silly to start saving towards retirement now, but over time, those investments can grow and make you a wealthy person later in life.