How to Increase Your Savings Rate

A lot of people are quite shocked when they hear how much I save in comparison to what I spend. A lot of this is attributed to a big salary, but my expenses are still lower than most people that I know.

Saving so much is partly due to my upbringing, partly due to my relationship status and partly due to my competitive nature, but a lot of my savings can be attributed to certain habits that I have instilled in myself over the years. These are habits that anyone can reinforce in themselves to increase their savings rate.

How can you increase your savings rate? Check out my easy savings tips below.

Create a budget at the beginning of the year and stick to it

If you don’t have a budget you have no way of keeping your spending in check. You can’t accurately decide how much you can spend on the things that you really want to buy. It’s also much harder to tell if you’re over spending.

Creating a concise budget allows you to clearly see how much money you can dedicate to investments and how your hobbies will change your retirement date. You can then easily decide what to cut out, or even what to dedicate more money to.

I enjoy traveling, so I’ve purposely budgeted for more money to be spent on holidays over on the Saving Ninja Budget Planner. To help maintain my 80% savings rate, I’ve cut back on my other spending areas like eating out and buying luxury items.

With a budget, if my life circumstances change, I can easily jig the figures around. I can purposely take away from other optional spending categories and ensure that my savings rate will always stay at its rightful place, this way I know that my retirement date won’t be affected.

Give yourself a ‘Spending Pot

Every month, give yourself a certain amount of money that you can spend on whatever you like. This can be spent guilt free and you can use it to save up for bigger purchases. Doing this allows you to set a monthly figure that you’re happy with spending instead of just buying what you want whenever something takes your fancy and potentially decimating your early retirement dreams.

I give myself £100 per month to spend on what I like. If I want to buy something worth £300, I’ll have to go without purchasing any new clothes or games for a few months to save up for it. Even though I could easily afford to spend £300 each month, doing this keeps my purchases in check. I know exactly how much I can invest and I can spend my money confidently (and guilt free!) knowing that it won’t affect my savings rate.

Related posts:
How to Live Off 10k Per Year
Spending Less Makes You Happier
Being Rich Has Nothing to do With Your Salary

Create a ‘holding list’ for purchases

Your ‘holding list’ can be on paper or stored on a word editor. If you really want to buy something, instead of just getting it, put it on a holding list for 2 weeks. This way you can tell if you really want it or if it’s a passing fad. Most of the time your desire for the item will go away.

In the modern world, there are advertisements everywhere to get you to spend, spend, spend. Even the most avid saver can sometimes succumb to advertising’s strong influence.

Sometimes you’ll feel like you want something so much and that you won’t be happy unless you have it. You’ll then regret your purchase after you become bored of it in a couple of weeks. Creating a holding list can fix this problem.

Buy second hand, and sell again after you’re done

If you absolutely must buy those ‘luxury’ items, make sure you buy them second hand.

This is an especially good tip for games. I wanted a Nintendo Switch since it’s release date but I was adamant that I shouldn’t buy one as I already had lots of other consoles and games I hadn’t yet finished. After over a year of lusting after one, I eventually gave in. I bought the Switch second hand and also bought some games second hand. Switch games rarely fall in value, this allowed me to sell them for the same price (or sometimes a higher price) after I had completed them and then buy another one!

Buying second hand and selling again is a great way to combat your instant gratification monkey. Who says you can’t spend money when saving a lot? Just make sure you sell again when you’re done :]

Buy for longevity instead of cheapness

This seems counter-intuitive to the aspiring saver. Lots of people wrongly assume that they need to buy cheap to save more money, but the real trick is to buy for longevity. A £120 good quality coat that will last you 15 years is much better than one for £40 that will last you 1.

This is not to be confused with buying brands. Make sure that your extra money is going on quality and not a brand name. Do your research before hand and make sure you know what you’re buying.

Unsubscribe from retailers that constantly send you ‘sales’ promotions

A lot of websites and shops are in constant sales mode. They do this to psychologically trick you into spending more. Don’t fall victim to it, unsubscribe from their mailing list! You’ll be much better off only buying what you need.

When shopping on Amazon there is a good Chrome extension that you can add called Keepa, this app shows you the price history of each item you’re viewing. It also tells you what the average price is. Using this, you can easily tell if the seller has hiked the prices up on purpose just before a ‘sale’. This extension is a must around events like black friday!

Declutter your home

A lot of people end up buying multiples of the same item as they don’t realise they already own it. Keeping your house tidy and throwing away what you no longer need is a great way to better keep track of what you already own. It will also help throttle the need to buy more stuff when you realise how much you’re throwing away.

There is also evidence that suggests that living more minimally and clutter free allows you to think more clearly, be more productive and most importantly, live a happier life. An excellent book written about this topic is Marie Kondo’s ‘The Magic of Tidying,’ give this a read if you need some more inspiration!

Have you got any tips for increasing your savings rate? Let me know in the comments below.


19 thoughts on “How to Increase Your Savings Rate

  1. Promise this is related (i think!) The bit I struggle with (and one I’ve decided to rebalance now despite the tax it costs me) is the split between isas and pensions.

    I find it fareasier to achieve ahigher ish savings rate (not in your realms but around 36%) by putting 16-18% of my salary where I can’t see it and before I even get it (via pensions Saye and stock investment purchase) this excludes another 6% from my employer

    The ‘Downside’ (tongue in cheek I know) to this is at 39 I’m going to have about 230,000 in a pension. With 17k total a year even assuming I don’t up my salary going in to my pension it won’t take a huge growth rate to be well above the lta allowance well before I’m 60

    So although I could afford to put more in I’ve stopped upping this (leaving space for bonuses which would take me above 100k,) and am now building non pension wealth. I may reduce to the minimum to get the employer contributions once I get to 500k

    I just have to be more disciplined and not spend it lol

    1. Hah, yeah, you gotta get the not spending it down :))

      I’m not worrying about the LTA for now, I’ll review it again in 2 – 3 years and then I’ll probably reduce to just employer matching and focus on filling my own and my partners ISAs, and also filling my non-tax-sheltered accounts. You should be able to have about 100k invested to use up all of your capital gains allowance (so it’s effectively like an ISA). I suspect that after I’ve filled that I’ll be well and truly ready to retire.

      Some back of the napkin maths (based on my own numbers):

      Pension total: £33,182
      ISA total: £18,310

      Pension yearly deposits: £30,948 – hoping to rise to £40,000 after 1 year
      ISA yearly deposits: £20,000

      After 3 years with 6% growth, my pension pot should be at around £160,942. Being 30, predicting a 30 year until drawdown period, that should leave me at £1.029mill at 60. That’s without contributing anything else into my pension for 30 years, so I should probably stop in a year or two instead. But keeping it at £160,942, I should also have £87,799 in my ISA after those 3 years. If I stopped paying into my pension I should have enough to contribute, say, 20k PA into my non-sheltered account.

      It will take roughly 4.5 years to reach 100k (and get the full capital gains allowance) in that account, after 5 years, my figures should be looking like this:

      100k non-tax-sheltered account
      £218,479 ISA
      £210,686 Pension (locked for 25+ years)

      I’d be pretty confident retiring with a £318,479 bridge to last me for 25 years. If the stock markets continued to earn a steady 6% (which of course it wouldn’t!) I should be able to draw down £20-£25k PA, and of course, I’d still probably be earning some money due to my current addiction with finances! None of these figures account for equity in housing either. Basically, all this waffle was to say that you don’t need to worry about the LTA, just pre-fill it as much as you can, then stop and let the snowball roll. Of course, it would reduce savings rates though 🙂

      I’ll probably have to do a detailed analysis of this in a post next year to review whether I should continue plowing into my pension.

  2. Bear in mind the lta will increase with inflation so by then will be alot higher than 1.09m. Also trying to plan that far out is dangerous I think. The world will be a very different place in 30 years and a million won’t go that far I would personally aim for more
    That said you’ll be surprised how quick it increases. If you’re putting 60k a year away you probably earn similar to me given your spending. Bear in mind I took a 100k hit 4 years ago from a divorce and I’m at over half a million net worth now. I don’t feel remotely able to retire yet!

  3. Great tips Ninja!

    I meant to say this on your tidying up/clothes post about the coat example. The thing with me is that I’m very adept at losing things, so although I would love to drop £120 on a really nice coat, I fear I would just leave it on the train or something stupid like that (yes I’ve done this with coats, hats, even squash rackets!)

    So that is sometimes why I go for a cheaper item, in the event it gets lost or stolen then it is much less heartache. Then there is the fact that expensive items are more desirable for thieves in the first place! You can still often make cheaper item last year’s anyway if you shop around or buy second hand like you say


    1. That’s a fair point TFS! I left something on the train for the first time the other week (my cycling helmet), feels a bit shit when this happens.

      I still haven’t found the perfect point of value for mobile phones. I’ve bought my Dad two now, the first, second hand, and the other, not a ‘premium’ brand but new. Both seem to break after about a year. OnePlus seems like it’s got a good thing going, but I still can’t sensibly think to spend even £399 on a phone for my Dad (as he’ll only use WhatsApp and the camera).

  4. Lots of good points. Also if you work in a big city there are lots of opportunities to get free stuff. Many pub chains offer free beer if you sign up via their apps. Ember Inns, All Bar One, Pitcher & Piano. If you have a Caffe Nero close by then get an O2 PAYG SIM and top it up with £10. You’ll then be able to use the O2 priority app and get a free coffee at Nero after Midday on either a Tuesday or Wednesday – you also get loyalty points too. Put all your spending on 0% or cashback credit cards, keep the “cash you would have spent” in your own accounts earning interest and either pay the card off at the end of the 0% period or flip it onto a 0% balance transfer card. This is called stoozing and whilst interest rates are low you will not earn much interest but I earn about £300 per annum in interest this way – which pays for the odd treat.

    My personal savings rate is something like 90% My employer pays me a base salary and then “flexible benefit points” It’s most tax efficient to use the points in pension contributions. I also use salary sacrifice to reduce my exposure to income tax and NI and I sacrifice 70% of my base salary into that. My employer also pays in half the employers NI they save when I use salary sacrifice. So I’m presently paying in about £45k to my pension ( as I have a bit of pension carry over ).

    1. Some awesome tips there David, thank you!

      Your savings rate is insane. You should be called the Saving Ninja, not me 😛 I think about 50% is going into my pension.

      1. Thanks, having a high savings rate brings it own complications though. The dangers of breaching the pension annual or lifetime allowance are my principal concerns at present.

      2. I have American Express credit card and pay for virtually everything with it (other than direct debits and standing orders), and get 1% cash back – very easy way to reduce purchases by 1%, also use TopCashback for online purchases so make a bit of money there (tip, there’s some good cash back deals on ISAs).
        Other than that I pay 20% of my salary into work pension, employer adds another 10%, and I put £20k a year into an isa. My pension is currently £212k and my isa is £42k, plus about £3k in other long-term savings. I’m 40, I used to put most of my money into paying down the mortgage faster (house is worth £650-£700k), but that was before I knew about FIRE or understood the various tax implications for higher rate taxpayers.

  5. Join the military and the MOD contribute for you! I’ve done 16 yrs so far and my pension pot is worth £160K to date. In 6yrs i’ll get £12k a yr for life (CPI adjusted from 55) and 40K lumper in my sky rocket.

    1. I’ve heard that it’s really easy to save a lot in the military! You can get some good qualifications by enrolling at a young age too.

  6. That’s a nice post SavingNinja! I never really went the budgetting route. I automated my savings and that was it for me. But I’ve decided to change…and make a budget as well from now on. There’s definitely money to be made by just following one or more of your rules.. Thanks!

  7. Declutter your home – I fail on this big time!!

    I do the odd mass spelling spree on eBay just to help out a bit with the decluttering side of things. But with 3 dogs in the house which essentially means it’s a mad house 100% of the time, decluttering is practically impossible!

    I shall follow up with a decluttering based post with before and after pictures!

  8. I have halved our food bill since I stopped shopping in Waitrose. I absolutely love the shop, but Tesco is so much cheaper. I also have a Tesco credit card, currently with 0% interest rate and I pay for most items with this. As well as vouchers towards the grocery bill I have so far made a small amount stoozing. Just need to make sure I pay the balance off in full at the end of the 0% period. Other savings I have made are the traditional ones, e.g. not buying a sandwich and a coffee several times a week. Although this is such a cliché it is surprisingly effective. It is amazing how much it adds up. I am only saving about 20% of my income, but another 20% is going towards overpaying the mortgage so we can be completely debt free.

  9. I agree on your list especially on buying second hand. I love thrifting and I enjoy finding gems hiding underneath a pile of what seems to be rubbish for some people.

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