How to save £1000 a year (and what to do with it).

Today my train on the London Underground was so packed that I didn’t even have space to open a newspaper. After wondering a bit about why people make such journeys every day for years on end, I tried to be a bit more productive.

One of the ways in which I’m trying to be more sensible with money is by cutting down on takeaway coffees. I’d got into the habit of getting one on the way into work and another at lunchtime. I decided to cut this out, apart from maybe once a week, since most of the time drinking the coffee was automatic and I barely even noticed I was drinking it. Today on the tube I did a few calculations on this change.

An average small cappuccino costs about £2.10. What with sizes as they are, why you’d ever want more than a small cup is beyond me. Two of those a day for each working day works out at £21 a week. For the sake of simplicity we’ll assume that this happens every week of the year. £21 for 52 weeks equals £1092. That is, by cutting out those two coffees I’m saving myself over a grand each year. If you don’t drink much coffee, the same applies for buying lunch each day or whatever. Hell, even if I cut down to one coffee a day, I’d still have a tidy lump sum at the end of the year if I saved the extra cash.

I then started to think of the various things you could do with that money:

1. Save it.

An obvious choice, but surprisingly effective. If you save that £1092 each year and reinvest the interest, a 5% interest rate will give you £6335.69 at the end of five years. There is a hell of a lot you can do with that kind of money!

2. Donate it.

A choice for the moral reader. My tube train happened to have an advert for a homeless charity I donate to called Centre Point. £12 a month gives a homeless person a room for up to two years and helps them to move off the street permanently. That comes to £144 a year, which means that with your coffee money you could get seven people off the street and still have some change to spare. Money donated to developing countries obviously goes even further. Your coffee money could save dozens of lives.

3. Volunteer.

The UK’s VSO offers a volunteering programme for 18-25 year olds called Global Xchange. It’s a crummy name, admittedly, but an attractive programme. You spend three months volunteering in the UK and another three in a developing country. £600 covers pretty much all your expenses. With the money left over you could do another programme such as BUNAC’s Volunteer USA. 12 weeks costs just £250, though there are other expenses such as flights and visas. Still, that coffee money would cover the great majority of your costs, meaning that you could volunteer for almost a year on the money that would have gone to Starbucks instead.

In effect, by cutting back on takeaway coffee or lunches or whatever you can easily put away around £20 a week while barely impacting on your lifestyle. If such easy changes can reap such large rewards, imagine what a difference the big changes could make!