How spending habits changed in 2020 and the legacy of cost-cutting into 2021

Many people’s spending habits altered dramatically during 2020 – and some may have adopted cost-cutting techniques that they now hope to keep longer-term.

While the idea of drastically tightening our budgets may once have seemed too daunting or unachievable, last year might have shown us that, actually, we can survive quite comfortably on less.

Nearly half (47 per cent) of workers plan to cut down in the longer term on past expenses, such as work lunches, takeaway coffees or work drinks, according to a survey by Aldermore Bank. In addition, nearly two-thirds (68 per cent) say that in the future, they will continue to use cost-cutting techniques they acquired during lockdown so they can continue to save money.

The most mentioned savings methods were shopping less often for non-essentials (33 per cent say they will continue to do this), spending less on socialising (29 per cent) and reducing the cost of the weekly shop (22 per cent).

One in seven (14 per cent) expect to work from home more often longer term, saving money on their commute, while the same proportion (14 per cent) anticipate having fewer holidays abroad in the coming years.

In addition, 12 per cent expect to use public transport or cycle more often, and 11 per cent will cancel non-essential direct debits, such as those for gym memberships.

Ewan Edwards, director of savings at Aldermore, says: “One positive to take from 2020 is it has given some people the opportunity to reflect on how to improve their personal finances. Our data shows how little savings here and there can in the long term add up to big rewards.”

If you have had the chance to overhaul your approach to budgeting and save more than usual, you might want to think about how best to store that money.

“It’s important to ensure this spare cash is working for you as best as possible, and not just lying dormant in a current account,” Edwards adds.

“As we look towards returning to more normality in the future, this is a good opportunity to find a savings account which suits your personal 2021 savings goals and make all those little and big savings work harder for you.”

Many people suffered significant income hits during 2020 too, amid job losses, pay cuts and furloughing, and businesses being impacted by restrictions. But Aldermore’s research found that some people have been managing to put some extra cash aside.

For those who have managed to save some cash while working from home, the average amount built up in the first six months was £2,860, according to their poll. Even small savings gained by working from home have been adding up quickly, the survey of 2,000 people across the UK suggests.

The biggest savings include £29 per week on average from not commuting to and from work, £20 by not spending so much on breakfasts and lunches, and £22 per week on not socialising with work colleagues in person.

Aldermore also calculates that home workers are typically saving an additional £18 per week by avoiding takeaway coffees and £22 a week by not going out on after work.

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