Knowing how to save money is the cornerstone of good economic health.

We have all heard that saving money is the key to growing your money. But is that true? Is saving really an essential factor to accumulate wealth?

Absolutely yes. Saving is necessary (and essential) if you want your money to grow.

It's important to know how to save money.

Unless you are expecting to win the lottery, in order to get rich you have to start by saving.

In this guide I am not going to teach you how to save money fast, unfortunately there is no magic formula.

What I am going to do is show you step by step how you can save a lot of money following my method, with which I managed to save 61% of my income in 2019.

Whether you want to learn how to save money for a house, reduce your debt or start investing, this is your place!

Are you ready to improve your personal finances? Let’s go!

How to save money step by step

I know that right now you don’t know very well how to save money. It seems difficult because you are struggling with all your expenses, and you think it is not possible.

Surely you think that to save you would need a higher salary. Well, I’m happy to tell you that this is not true 🙂

Obviously the higher your income the easier it is to save, but you don’t need to have a high salary to save.

There are many easy ways to save money, and on this guide I am going to give you many ideas, so you can stop and think which ones you like more.

I will show you how to save from a salary, regardless of your level of income.

Track your expenses

The first step is to cut your expenses.

Earning money is not easy, you have to get up every day and go to work. But, when you receive your salary, it looks like your money disappears, right?

Don’t worry, it happens to a lot of people, and it’s due to not having control of where your money goes.

The first step is to review the expenses you have regularly to know how much you spend. In order to start saving money you first have to know what you are spending your money on.

For this I recommend two approaches:

  1. Budgeting apps
  2. An excel spreadsheet

I personally use an excel spreadsheet, I am a big fan of excel since I started working 10 years ago.

I love how much excel helps you to structure information, automate tasks and get aggregate data.

Once you have decided on the method to track your expenses, you have to get down to it!

You must write down all the expenses you have during a month. I know it sounds a bit boring, but you must do it.

It is important to track all your expenses, and assign them a category. Like this it’s easier to know where you can cut.

Once you have all your expenses, you should analyze where you can spend less money without impacting your lifestyle. Many times we spend money on things, but they do not bring us happiness or add any value.

So it is essential to know what is important to us, and where we can reduce our spending.

Let’s see a real example.

Expenses example for a couple

Let’s see the expenses of a couple who rent an apartment:

In order to save you need to track your expenses.

In the table you can see the couple is saving 600 pounds per month, 17% of their income.

This is above the average saving rate in UK, which is 5%. In other words, this couple saves more than three times the average! However, they can save much more.

We see that they spend 400 pounds a month to eat out (restaurants, drinks, pints, etc). One way to cut your expenses is to go to cheaper restaurants and eat out less. Doing so they could save 200 pounds.

Whims include shopping, travel, technology, etc. Here they are spending 500 pounds, 14% of their salary.

If you translate it on time, this couple works 3 days a month just to pay for these whims. Impressive, isn’t it?

Here again you can save a lot if you cut down on shopping and travelling. We are going to assume that they reduce it to 200 pounds, saving another 300 pounds.

Only with these two adjustments they have managed to save 500 pounds more, nearly doubling their savings rate! Don’t you think it’s amazing?

This couple would save 1100 pounds per month, 31% of their salary. They could use that money to invest, hence increasing their savings.

That’s why it is so important to review your spending and know where your money is going.

If you want to save money, you will have to try hard at the beginning The good thing is that after a while you will save without even realising it, I promise you.

Following this strategy I managed to save 61% of my income during 2019.

Set your savings priorities

You need to set your saving priorities.

When you start to review your purchases and assess where you can save, some questions arises. Should I cut my expenses completely? Could I save more if I eat rice and didn’t have a drink with my family and friends?

I know, it is an extreme example, I want to make sure you understand the concept 🙂

To save you don’t have to live like you don’t have any money. It’s a matter of setting your savings priorities. But, what does this mean?

You must understand which expenses make you happy, and which ones you could stop doing without impacting your lifestyle.

Which expenses are needs and which are whims.

For example, I love going to the gym, I really enjoy doing sport and following my exercise routines. Therefore, the £30 I spend every month are totally worth it.

Another example is my girlfriend. She likes to eat healthy, so she doesn’t mind spending more money buying higher quality products. It is an expense that makes her healthier, so those 40 pounds a month are also worth it for her.

Both are good examples of what we each like, and how we like to spend our money.

Therefore, it is essential to know how to distinguish what is really important to you, and what is not.

Create your budget

Once you know what you’re spending money on and you’ve decided what your savings priorities are, it’s time to create your budget.

Creating your budget means setting a spending amount for each category.

In order to do that you must have tracked your expenses for at least one month (I would recommend three months to get an average value).

Your budget should have the following categories:

  • Rent/Mortgage
  • Bills: gas, electricity, water, broadband, mobile phone
  • Food (supermarket)
  • Eating and drinking out: all those pints with the mates 🙂
  • Public transport
  • Car: petrol, insurance, annual taxes, repairs
  • Whims: clothes, technology (digital cameras, computers, mobiles, etc.), shopping
  • Other: everything else

You must set a spending amount for each category. Let’s take a look at the following example, for the expenses of one person renting:

This is a good example of a person who does not waste money. This can be seen from the fact that his spending on eating out, food and whims is small.

Once you have your budget, it’s time to compare with your actual spending.

Every month you should review the expenses you have had and see if you are meeting your spending goal.

If you do not comply, analyze why. Perhaps you can identify some redundant expenses, or maybe your spending goal is too restrictive and you have to raise it.

Your budget will depend on your circumstances. A single couple does not have the sames expenses as a couple with two children.

Fixed expenses vs one-off expenses

When you create your household budget it is important to understand what your fixed expenses are, and what are the one-off expenses.

Many times we forget to take into account one-off expenses, such as travel, car insurance, Christmas gifts or weddings.

These extra expenses, since they do not occur every month, are usually not taken into account when preparing our budget.

It is important to take them into account to get an idea of how much money we are going to spend each month on average. One way to do this is to sum the one-off expenses you had in 2019, and divide them by 12.

This way you get the monthly cost of your one-off expenses. Once you add your one-off expenses to your fixed expenses, you will have your complete household budget.

I know what I’m telling you right now ssounds a bit painful, but creating your budget is the first step to start saving.

Don’t despair, it’s easier than it sounds! Like everything in life, the most difficult step is the first, and you have already taken it by starting to read this guide.

After all, even a marathon starts with one step.

Set yourself a monthly savings goal

Which are the best index funds to invest in?

This is the last part of your savings plan, and in my opinion it is the simplest.

Once you have your budget, it’s a matter of subtracting that budget from your salary. As a result, you will get the savings you should have every month.

The amount of money you can save will depend on your salary and your budget. Let me explain it with an example, which always makes things easier.

In the previous example, a single person renting had expenses of 1200 pounds per month. Suppose this person has a salary of 2000 pounds.

His savings target would then be his salary (£2000) minus his household budget (£1200). £2000 – £1200 is 800 pounds.

His savings target would be 800 pounds a month, which is 40% of his salary.

A saving of £800 a month means 9600 pounds a year. Those 9600 pounds equal to nearly 5 months of work.

In order to put it in perspective, with those 9600 pounds he could take a sabbatical of 5 months. That means 5 months of holidays.

Don’t you think it’s extraordinary? That is the true power of saving 🙂

How about saving 40% of your salary? Surely at the beginning of the guide it would have seemed crazy to you, but now it doesn’t, right?

Simply by following these steps you can get it. That’s how last year I saved not 40%, but 60% of my salary.

Don’t buy with credit -> Plan your purchases

In one up on Wall Street Peter Lynch highlights the importance of investing in companies with no debt.

Run away from debt. This is a key part to grow your savings. It is very important not to buy anything that you cannot pay at this very moment.

This applies to absolutely EVERYTHING (the only exception is a house, for obvious reasons 🙂 ).

Buying with credit cards and loans is the quickest way to lose money

If you don’t have money to buy something now, don’t buy it. Period.

When you get a loan, you are stealing money from your future self. It is as if you were saying:

“Hey Gonzalo from the future, I really want to have the latest Iphone, so I’m going to take 50 pounds from you every month, okay?”

By buying something with your credit card you are making yourself poorer, not only now, but also in the future. And there are even more downsides.

When you repay the debt you have to pay interest, so you end up paying much more money.

For example, you request a loan of £12,000 to buy a car, with a 8% annual interest, and a length of 6 years.

When the term ends, you will have paid £15,000 pounds, £3000 pounds more! Furthermore, if you don’t pay your debts, you will impact negatively your credit score.

It is much more advisable to buy a second-hand car, and save every month until you can buy the new car without a loan.

Tips to save money everyday

You can save money everyday with small changes.

Congratulations on reaching this part of the guide, it means that you are working hard to learn how to save money.

So far we have seen the importance of tracking your spending, prioritising your expenses, preparing your budget and not using debt.

If you have learned that, you are on the right track 🙂

The goal of saving is not to live without being able to do the things you like. That wouldn’t make sense, since it would make you unhappy. And it’s not worth being unhappy just to save a little more.

The key to saving is to identify those things that you don’t need and don’t add value, but do empty your pocket, and stop buying them.

Now let’s look at some money saving hacks, so you can start saving today.

How to save money on food

Food is one of the biggest expenses we have every month. Sometimes we don’t realise how much we can save in the supermarket. Let me show you how to save money on groceries.

The first recommendation is to always look for the supermarket brand. I usually buy the brand of the supermarket, which is often 50% cheaper than the “well-known brands”.

A more expensive product does not mean it is better. Let’s see an example that I think will open your eyes.

A simple search reveals that Warburtons white bread costs £1.05, and Tesco costs £0.59.

You can save a lot of money on food

Tesco brand is 44% cheaper.

Do you think it’s just this case?

Let’s take a look at the toilet paper, so valuable these days of Coronavirus.

Comparing the £0.29/100 sheet of Andrex with the £0.15/100 sheet of Tesco, you see again that Tesco is 48% cheaper.

You can save 48% money just by buying the supermarket brand!

Another good way to save money on food is by taking advantage of the offers.

It’s very common to see products with a big discount, 2for1 offer, 3for2, any 2 for 3£, and so on. If you pay attention to these offers you can save even more money.

You can also find amazing discounts in the “reduced to clear” section. It contains the products that are about to expire, and therefore are much cheaper.

Another trick to avoid overpaying is to make a list of what you are going to buy before going to the supermarket. Planning your shopping is one of the best ways to avoid compulsive buying.

By following these tips you can save more than 60% on your food budget. If your average food expense is £200 a month, that would mean £120 savings each month. In a year that amounts to £1,440.

You can save £1,440 a year (60% of your average cost) just by paying attention to what you buy in the supermarket.

If you have a local market near your house, check its prices. Sometimes you can find cheaper products than in the supermarket.

This is a good way to learn how to save money as a student, since you can save hundreds of pounds.

Do you want to continue learning more ways to save money? Keep reading!

How to save on broadband, mobile and TV

We all have internet access, a mobile phone and we watch TV. These “luxuries” make our lives much more comfortable, and I would never recommend you to give them up.

But, I am going to ask you to check if you are paying more than you should for these services.

I really enjoy watching movies sitting on my sofa, to me it is one of the great pleasures of life. I also like to watch videos on Youtube and browse Twitter and Facebook when I go on the tube, and I don’t want to have to deprive myself of this in order to save 1 pound a month.

Of course, there is a big difference between saving 1 pound and saving 70. Let me explain it with an comparison between my mum (I hope she does not get angry …) and I:

Let me explain you how to save money on internet, phone and TV bundles.

As you can see, my mother pays 73 pounds more than me. My mother has one bundle with mobile phone, fibre and TV service that includes movies and football.

I honestly have everything I need with Netflix, my 100 Mbps fibre and my phone with 8GBs per month.

A saving of 73 pounds a month amounts to 876 pounds a year. Doesn’t it seem brutal to you?

Again, it all depends on what is important to you. My mother really likes to watch football, and she gladly pays those 876 pounds every year.

As you have just seen, some companies charge you too much for these services, so make sure you get a good deal.

Saving on the car – Do you really need a car?

Most adults over 25 in UK have a car. The question is, do we all really need a car?

The answer is clear: no. Not everyone needs a car, but it is a deeply rooted custom in United Kingdom.

In cities with good public transport like London, many people do not use the car to go to work. And still, many buy a car.

Cars represent one of the greatest expenses of a person in its entire life.

I want you to ask yourself: do I really need a car?

I bought a car 9 years ago, and looking back, I shouldn’t have. That is why I recommend that before buying a car you think if it will really be worth it.

A car requires initially a big lump sum (approximately 15,000 pounds on average), and then periodic expenses (insurance, petrol, taxes, repairs).

These periodic costs can add up to more than £1,500 a year. If you earn 2,000 pounds a month, that means you will work nearly a month to pay for the car.

I don’t know about you, but I don’t feel like working one whole month just to pay the car expenses (not counting the initial cost of buying the car …).

If you need a car for your day to day, I recommend that you buy a second-hand one.

A car loses approximately 30% of its value when it leaves the dealership. If it costs you 15,000 pounds, the moment you start driving it is already worth 4500 pounds less.

Are you sure it is worth buying a new car and “lose” 4500 pounds when you start to drive it?

A second-hand car is much cheaper, and if you take good care of it it can last you many years.

Car expenses to reduce -> insurance and petrol

The main expense of owning a car is insurance. It is mandatory to have insurance, so you cannot eliminate this expense.

But you can greatly cut its cost. Insurance can cost you from £150 to £1000. And those £850 difference most of the time are not justified.

Obviously the cost will depend on whether you the type of insurance you buy. But I assure you that the same type of insurance, depending on the company, can cost you 50% less.

There are websites that compare the insurances of all the companies and highlight the cheapest ones. I use this insurance comparator.

Saving on petrol is also possible. Many times we take the car to make a 10-minute walk, because we are used to it, because it’s comfortable.

Ask yourself if you can reduce your car trips. Walking is much healthier, and you will also cut your car costs.

Also, check if you can make your trips by public transport. Maybe you don’t need the car after all? 🙂

If you want to know how to save money in London, getting rid of your car (if you have one) is my first advice.

Save money when you eat at work

The flood of information and data on investment flooded me

One of our bigger expenses we have is eating out when we work.

The most common workday is from 9 to 6 with a 1 hour break to eat. Most people grab a take-away or eat at a restaurant every day.

I prefer to take my food in a tupper, it is tastier, I spend less time at my lunch break (I can leave work earlier) and I save. Let me show you an example.

Let’s say that the average cost of a takeaway in UK is £8. If you take the food from home, we will assume a cost of £2. This implies a saving of £6 a day.

These daily expenses accumulate, week by week, month by month. In one month they will add up to an extra spending of 126 pounds, which means 1512 pounds a year.

If you eat at restaurants, you would spend on average 2500 pounds more.

If you take food from home and avoid eating out at work, you can save up to 2500 pounds a year

2500 pounds a year just for preparing food at home, don’t you think it’s brutal?

The most common salary in UK is £1,800 per month. This means that many people spend more than a month of their job’s salary each year eating out.

Taking your food from home is a great way to start saving money.

More money saving tips

Here I tell you more tricks to save money.

Now I am going to summarise some money saving tips where you can save a lot of money:

  • Electricity: reduce your consumption, choose the cheapest energy company and buy low-consumption appliances. Here is a guide to energy saving
  • Bank account switching rewards: many banks will pay you for switching to them. The best bank accounts are Natwest, RBS and HSBC; where you can get a reward of £175 for switching
  • Company benefits: many companies offer pension and shares benefits, where they top up your pension contributions and give you 2×1 on shares. Take advantage of those to increase your savings
  • Coffee: drinking coffee at home/office instead of going to Starbucks can save you up to 700 pounds a year (do the math, I’m not lying!)
  • Shopping: buy clothes that you really need, avoid compulsive shopping (don’t go shopping because you’re bored). If you have a closet full of clothes, don’t buy more
  • Mortgage: do not settle with what your regular bank offers you. Use this mortgage comparator to get the cheapest one
  • Gym:if you don’t go to the gym, stop paying the subscription. Sign up only if you will go. That applies to any subscription you pay for but you are not using
  • Insurance: review the insurances you are paying are really worth it. Some insurances are cheap and help you to save (travel insurance) while others are a waste of money (mobile phone insurance)
  • Mobile: an iphone/samsung can cost you more than 1000 pounds. There are very good phones for less than 200 pounds (Xiaomi and Huawei for example). I have had 3 years a phone that costed me 200 pounds
  • Computers/Tablets: As with mobiles, you can find very good devices at competitive prices. Search opinions online and choose what you need

I know that some tips to save money seem somewhat extreme. I get it.

The idea of this guide is not for you to follow all the recommendations, but that you ask yourself which ones you can apply without affecting your lifestyle

For example, if you wonder how to save money at home, energy saving is something within everyone’s reach, and your gas and electricity bill will thank you 🙂

Living a frugal life is much easier than it looks. We don’t need much to be happy, since usually the simple stuff is what has more value to us.

Apps to save money

New technologies have brought a lot of information and comfort to our lives. And this also applies to savings.

There are free moneysaving apps that are very useful tools. I’m going to summarise the ones that I like the most


Emma is one of the best budgeting apps I have seen. It allows you to control your expenses by automatically dividing them into categories.

To do this you have to connect it to your banks (don’t worry, it’s safe). Whenever you pay with a debit or credit card, the app will register your expense and assign it to its corresponding category.

It helps to cut down unnecessary spending by cancelling wasteful subscriptions. It also allows you to set budget goals.

This makes it very easy to check every month where your money is going.


This is my favorite app to save. It allows you to exchange money between currencies, and pay in any currency, at no cost, totally free.

The exchange rate it applies is the real-time exchange rate. I have been using it for 3 years and I could not be happier.

For people who move between countries with different currencies (Euro Zone and the United Kingdom for example) it is tremendously useful.

It also comes in handy when you go on holidays. A year ago I was in Vietnam and I didn’t pay a single pound in bank fees or exchange rates.

As if this was not enough, it groups all your expenses into categories, helping you to save by highlighting where your money is going.

Money Dashboard

It was voted the Best Personal Finance app in 2017 and 2018. It automatically categorises transactions.

This app also helps you to get on top of your debts. Unfortunately many of us fall into debt at some point of our lives.

Whether it’s a student loan, mortgage or overdraft, Money Dashboard helps you to allocate an appropriate amount of money towards paying off your debts.

It allows you to plan and predict for your finances and budget in the future.


Shopmium is a great cashback app that was launched in 2011. It gives you exclusive offers on many brands for UK supermarkets, aggregating offers from many cashback sites.

The offers change every week, and the company works with roughly 500 well-known brands such as Nestle, Pepsi, McCain and much more.

Cashback rewards are paid through Paypal, and some offers give you 100% cashback.

Yes, you read that right. You can get stuff for free!

In addition to these apps, there are several websites that can help you save money:

  • Groupon: contains offers of all kinds (travelling, spas, courses, etc.), with discounts of up to 80% through its vouchers
  • Amazon price comparison: product prices on Amazon are constantly changing. This website shows you the evolution of the price so you know if it is a good time to buy your product

Use the apps/webs that suit you the most and start saving today 🙂

What to do with your savings?

What do you do with your savings?

Changing your habits is not easy at first, but once you get used to saving, you will begin to see your money accumulating in the bank account.

Watching your savings grow each month is a great feeling, a reward for doing the things right. But what do you do with all that money now?

I recommend that you do two things

Create an emergency fund

An emergency fund means to deposit a fixed amount of money in your bank – in your savings account, for example – , so you can face any financial dilemma you might suffer.

Nobody likes to think that something bad is going to happen, but unfortunately we all end up facing sudden payments.

Your car may break down and you have to pay 700 pounds to fix it. Or your jaw starts to hurt and your dentist tells you a mouth guard costs 300 pounds.

The best way to prepared for these cases is to have your emergency fund. This way you have the security of being able to face anything without having to request a loan.

Your emergency fund should cover 6 months of your average monthly expenses. So, if you spend 1500 pounds a month, your emergency fund should be 9000 pounds.

Having your emergency fund is the best way to sleep peacefully at night 🙂

Invest – Make your money work for you

Once you have saved some money you need to make your money work for you.

Now the fun begins. Once you’ve built your emergency fund, it’s time to take advantage of your savings.

In order to do that you need to invest your money, since savings accounts currently give 1% annual return. That’s a very low return.

The best way to start investing is with the stock market. I explain you everything you need in my guide to invest in stocks.

There is nothing better than sitting down to rest while your money works for you.

We all know how hard is to earn money, so it’s great when you see your money working and generating more money.

Saving and investing are the main principles for a good financial health.

Once you have started saving and investing, you are in a good position to begin your journey towards financial freedom.

The best financial advice you can get is to start saving and investing as soon as possible. You will see the benefits in the short term, and further more more in the long term.

If you want to continue learning about how to save and take advantage of your money, I recommend the following blog articles:

And up to here my guide to save, I hope you liked it!

If you have any questions about this article, use the comments section, I am here to help you 🙂

Gonzalo Candela

I believe that the stock market is the best way to make your money work for you. In my blog I explain how anyone can be the master of its financial fate and make money investing.


ปั้มไลค์ · 16 May, 2020 at 22:09

Like!! I blog quite often and I genuinely thank you for your information. The article has truly peaked my interest.

Alan's Lifehack @live2ride · 19 May, 2020 at 18:35

For the average person this is the best way to create wealth. Eliminate wastage and over spending and use your hard earned money efficiently.

It’s a great post very comprehensive and practical. I have followed most of these steps with great success.

Even 5 years later I still go through this process to see where I can save more. · 20 May, 2020 at 05:09

    Hi Alan,
    Glad to see you around! I fully agree with you. There are lots of expenses that we can reduce or directly avoid without impacting our quality of life. We just need to review them to find that out.
    It’s great to check them periodically like you said, in case you can find further optimisation.

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