There are plenty of easy ways to make small savings on day-to-day purchases, but anyone seriously looking to turn around their finances needs to implement money saving ideas that hit the big time!
If you have decided to take the Money Saving Challenge this year, you’ll know the skinny:
- Create a budget
- Identify your most expensive monthly outgoings
- Starting with the most expensive, put in place a plan of action to reduce or remove that cost
- Move onto the next most expensive outgoing and so on….
Sometimes though, achieving decent savings on expensive monthly outgoings like mortgages, commuting and shopping, requires slightly more radical lifestyle changes than just quitting your daily Costa Coffee!
Cutting The Monthly Cost Of Car Ownership
This simplified example shows the monthly savings that can be achieved by taking ownership of a more affordable car:
Current Car
One year old BMW 3 Series 318i – Bought with a £20,000 loan
Loan period of 36 months
APR 13.99%
Monthly repayment £672.14
Money saving idea = Reduce the monthly repayment by selling the car and replacing it with a much more affordable model.
Replacement Car
Three year old BMW 1 Series 116i – Value approximately £10,000
Loan period of 36 months
APR 13.99%
Monthly repayment £336.07
Result: The loan repayment is reduced by half, providing a monthly saving of £336.07 (£4,032.84 each year), whilst still providing a prestige car.
Simples ya?
Multiple Benefits
Making big changes to our lives, can provide other benefits. For example a smaller car is likely to be more economical to run and service; whilst taking the decision to find a job much closer to home in order to reduce commuter costs, may result in the additional benefit of a salary increase.
By thinking big, being creative and putting in the effort to change, it is possible to achieve so much more impact than can ever be done with small frugalities alone.
How To Eat An Elephant
This is a popular task management analogy about breaking big tasks down into small, manageable chunks.
Nobody could eat a whole elephant in one go (and nor should they want to either!), but by eating a number of small portions each day, the poor elephant will soon be devoured.
Making big life changes needs to be done one step at a time. Think about what you want to achieve, then break that down into the individual tasks or steps and set yourself a suitable time period to complete them in.
So when the money saving idea is to reduce my bank loan by half by buying a cheaper car, the tasks will be:
- Confirm with my lender the possibility of repaying a large proportion of the loan early
- Clean, photograph and advertise my current car
- Identify a replacement car
- Sell my current car
- Buy a replacement car
Timeline: 3 weeks
Start Changing Your Life And Your Finances Today
Whether you think you can save money by renting a cheaper flat, driving a less-expensive car, cutting out your commute or even changing the way you exercise; set yourself a goal, put in place a plan and bank the savings!
Want to turn around your finances for good? Take the Money Saving Challenge to see if you can save an additional £250 each month.
Image courtesy Matt From London
I know it’s just an illustration but…
Although the 1-series is more frugal than the 3, it’s still a hefty cost – for starters, it will cost over £2k just to service the loan on a car that will lose an extra £2-3k in value the moment you drive it off the forecourt. Effectively paying £4-5k on a £10k car for the privilege of knowing nobody broke it in for you isn’t all that fiscally astute.
To make matters worse, a cash buyer would be able to negotiate a far lower price, so it’s not even really a £10k car. You might be lining the dealer’s pockets to the tune of 150% of the real cost of the vehicle.
Hi Dave, I appreciate there are many different facets to consider when trading down from one car to another and it is good to take into account some of the constraints you mentioned. Perhaps I over-simplified the example, but I guess the key point is that people need to make some big lifestyle changes to help improve their finances