Financial decisions that (really) move the needle

While I admittedly find it fun to economise my finances right down to the nitty gritty details (such as using cash back and never buying takeout coffee), for most people, these things are unlikely to make a blind bit of difference to your finances on their own. Yes, you might save a few hundred pounds a year, but that’s not going to change your life.

In this blog post, I’m going to ignore the noise and focus on the big things. Things that are really going to move the financial needle. If you’re serious about tackling your finances, you’ve got to take on the biggest expenses.

Housing, transportation and food are the three largest expenses for most people, so we’ll focus on these first.

Running a cheap car

Nobody cares about the car you drive. People might look at your car and think that they would like to drive it, but they don’t care that you’re the one who’s behind the wheel. Remember that. Maybe you already know this and drive a nice car because you like to (like me). But then again, I drove a beater car for eight years in order to get to this point.

You do not have a right to drive a nice car as soon as you have a reasonable job. In fact, you do not even have a right to drive a car at all. Cycling is far cheaper (especially with rising fuel prices), and if work and everything else you need to do is within cycling distance, then I’d recommend forgetting the car and getting a bicycle instead.

But if you must drive a car, there are many inexpensive options available. You should be looking for a small supermini or city car, 10-15 years old with a good service history, an initial cost of £2000 – £3000, and running costs of £2000 per year. This is about as cheap as motoring gets in the UK.

Living in cheap, rented accommodation

Housing will be your largest expense. So you should do all you can to keep costs low for as long as possible. This means living in a small place, ideally sharing with other people – and even better – in a low-cost of living area.

Now, ballpark figures here of course, but (accepting there is enormous geographic variation) rent per person for a three bedroom flat might be £450 per month. Add in council tax and bills, and you might be looking at ~£550 per month. Versus owning a £300k house (assuming 10% deposit), you might pay ~£1600 per month, split between 1-2 people (for a 5% interest mortgage over 25 years). The real issue with owning a house is that there are hidden costs that are easy to overlook. For example, you might need to allow £250 per month for maintenance/ repairs, £25 for insurance, £150 for council tax, and £200 per month for other bills (energy, water, internet) That brings the total closer to £2,200 per month.

Even living with a spouse would only cut the house costs down to ~£1,100 per month, more than double the cost of living in a small flat share.

Rarely eating out

We exist in a culture where eating out has become engrained into society. For many people, it is something that happens weekly, or even multiple times per week. However, it’s expensive – the average Briton spends ~£750 per year on restaurants and takeaways. Apart from the financial cost, my main criticism is that eating out should be an occasion – something you look forward to, dress up for, head to a nice restaurant and enjoy delicious food (and company). It should also be something you savour – and so by definition, be something you do only occasionally.

Eating out less frequently will save you a lot of money while encouraging you to really savour the occasion when it does happen. Most of the time, you should be eating cheap, wholesome, gourmet home-cooked food – delicious food that you’d happily pay money from a street vendor for. And yes, this means you will need to learn to cook.

What I suggest is curating a list of the 20-30 favourite dishes you like to eat. Find the recipes and save them – on your phone (I recommend Good Food) – or write them down if that’s your style. Always double the recipe so you have enough for leftovers (potentially multiple nights of leftovers), and batch cook (I can get away with cooking 2-3 times per week). This way, you will never run out of ideas of what to eat.

Not having a wedding

This is controversial, and not everyone will even entertain the idea. Your wedding will probably be the most important day of your life, so why should you not have one?

The simple fact of the matter is that the average cost of a wedding in the UK is around £21,000. This is more than enough reason to think twice – or thrice – about having one. Remember that £21k will compound to £1,146,561.15 over 50 years (when invested at 8% annual return)!

Of course, you could make a compromise. Perhaps an intimate ceremony with only a handful of close family is all you really need – costing anything from a few hundred to a couple of thousand pounds. Whatever you decide to do, you should never ever get yourself into debt over a wedding. Only pay for what you can afford.

Taking cheap package holidays

You want to explore the world. I get it. I do too. But travelling is expensive. The package holiday is the holy grail for keeping holiday costs down. Using websites like LoveHolidays, you can find dozens of 5-7 night holidays abroad, at 4+ star hotels, with flights included, for less than £500pp. Of course, you will have to make some sacrifices – like travelling in the off-season (who wants to holiday at the hottest, busiest time of the year anyway?) – and taking flights at odd times.

This does mean holidaying in (beautiful) countries with a lower cost of living – like Türkiye – so those expensive dream holidays in the US and Japan might have to wait.

Packing your own lunch for work

I hate to bring this up, but if you’re the kind of person who constantly buys take-out coffee and lunches during the working day, you could save a butt-load of money by making packed lunches. I’m really thinking about those of you in the Big City who are constantly spending £10-15 per day on this. £15 x 250 working days = £3,750 each year! You can make a perfectly good one packed lunch for under £2 per day, £500 per year.

The difference of £3,250, when invested in the stock market at 8% annual return, would be worth £2,170,148.12 after 50 years (I appreciate no-one’s going to be working for that long, but you get my point).

There’s no limit on how much you can earn

Unfortunately, there is a limit on how much you can cut out of your life. There are certain fixed expenses (bills, rent/ mortgage/ food) that you cannot avoid. The good news is that there is no limit on how much you can earn. It may seem hard to believe, but turn yourself into the ultimate employee and your boss will scramble to keep you – and you’ll be worth more than you realise.

The truth, however, is that you’re worth only as much as the dedication you give your job. If you’re only a mediocre employee, then expect a mediocre salary. Constantly improve yourself to become a better employee and then ask for a pay rise. Remember, there’s no upside on how much you can earn – perhaps there is in your office, but there’s nothing stopping you from changing jobs or even careers. Both getting promoted and changing jobs can provide significant pay rises – often in the region of 10-20%, and will compound into enormous salary increases if consistently done throughout your career.

Your job is ultimately the biggest lever you have to move the needle. It just requires that you consistently be an excellent employee that your boss cannot afford to lose. Doing this trumps all the money saving methods described above, and you’ll soon have enough money to live life on your own terms.

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