Ever run out of money before pay day? If so, you’re not alone.
For centuries, people were paid daily – be it in goods or money. Now, one of the toughest parts of budgeting can be making your money last throughout the month. So, what if you were to set yourself a daily wage? This could help you make it through to pay day without having to rely on an arranged overdraft, or credit card.
Draw up a monthly budget, using your last 3 months of earning and spending, to help you estimate. Then set aside your money for your bills, rent/mortgage and savings (this can be done at a later stage if you want to focus on making ends meet).
For HSBC customers using our mobile app, you can use the Balance After Bills tool to do this. Based on your regular bills, it estimates what you'll owe for the month ahead. Then it subtracts that amount from your current balance to show you what you could have left.
Say you have £900 left, after taking care of the core expenses listed above – this means you’d end up with £30 a day in a 30-day month. Every day you would try to spend within that amount. There may be exceptions, like if you do a weekly shop but ideally, you’d account for that by spending less in the days before or the days after.
This system isn’t for everyone as it involves a fair bit of management. Ideally, you would transfer your daily wage from another account, or pot, each day to stop you from overspending.
If you’re not able to do that, being aware of that daily amount can help guide your spending decisions and give you something to think about throughout the day.
Explore: How to make good spending decisions
If you've got a savings account but are finding saving difficult, you can take some steps to make it easier. The key to developing a habit is doing something often. So, you could try reducing the amount you’re aiming to save and increasing the frequency. A little a day can end up being a lot – even starting with 1p can make a difference.
Start by paying in 1p to your savings, then 2p the next day, 3p the next day and so on. If you’re able to do this for a year you’ll end up with £667.95, as well as any interest you earn.
If doing this daily sounds like too much work, you could try doing the same thing weekly instead. Pick an amount that seems manageable, like 50p or £1, and then increase it by that amount each week. If you start with £1 and increase the amount you save by £1 each week, you’ll end up with £1,378 in a year’s time.
Explore: Challenges to help you save money
Unless you’re a scientist, the word compound may not get you overly excited. But when it comes to saving money – it should. Or, at the very least, it could.
Compound interest is interest earned on interest. So, the earlier you put money away, the more interest you can earn over time. This is one of the big advantages of putting even a little amount away in a savings account and letting it grow.
It might not be that little, but if you take £1,000, for example, and put it in a savings account with an annual interest rate of 1.5% AER / Gross, you’d earn:
Keep in mind, you can also keep adding to that amount to increase your savings (and the amount you earn in interest) over that time. For example, if you added £20 a month to that initial £1,000 deposit with an annual interest rate of 1.5% AER / Gross, you'd have:
See more about compound interest and a detailed example.
Some companies will offer you a discount if you pay your bills annually, in full, rather than in instalments. This might apply to car or home insurance, for example.
It can be tricky to pay large one-off bills at different points throughout the year. But it can also save you a lot of money.
Explore: How to manage bills
AER stands for Annual Equivalent Rate. This shows you what the gross rate would be if interest were paid and compounded each year.
Gross is the rate of interest if interest were paid and not compounded each year.