Are you in the market for a new home? Perhaps you need to pay off some debts? Or, if you’re lucky, save for a holiday? No matter what you need money for, being more conscious of how you will save it makes for a much better outcome.
Here, we look at six ways to save money more effectively:
1. Set your financial goal
The more concrete your reason to save, the easier it is. According to MoneySmart, 53% of Australians save for a holiday, 46% save for a rainy day, and 40% save to buy or renovate their home. Other reasons to save include retirement, to pay off debts, or to invest in shares, bonds or commodities.
So, talk to your loved ones and work out what you want to save for. Remember to be specific and set a timeline. For example, ‘I want to save for my first home deposit. I will save $500 per month, so I can save $6,000 by the end of the year.’
2. Know your weaknesses
To achieve your saving goals, be realistic and know your limitations. Top reasons why Australians don’t achieve their saving goals include unexpected changes in financial circumstances, lack of willpower or setting an unachievable goal. Identify reasons why you might not keep your goal, and factor that into your planning.
3. Adjust your spending habits
Once you know your weaknesses, you can work out how to adjust your spending habits. If you’re partial to buying new clothes, try setting yourself a limit such as ‘only one item of new clothing a season’. If you spend a lot on dining out, determine if it’s really that important to you and perhaps consider making lunch and eating dinner in more often. Even small changes in your spending will make a difference to your hip pocket over time – sometimes, it’s just a matter of getting used to them.
4. Use a budget
Once you know your expenses more intimately, add in your income and create a budget. Now you just have to stick to it! From your budget, work out how much you can afford to save each week, fortnight or month.
Get started with our handy budget planner.
5. Make your money work for you
Set up an automatic transfer into a separate account – this should ideally be an interest-earning account you can’t easily access. Now you are not only saving money, you’re earning money.
The other option is transferring directly into an offset account that is attached to your mortgage. Instead of earning interest on your savings, you will pay less in interest on your mortgage, as the interest is calculated on the net balance of your loan, minus your savings.
6. Pay off your debts
The fastest way to get ahead is not to fall behind. Having a debt means you pay interest, which effectively means you are paying more in the long run. Pay off your credit cards every month, minimise spending on shop cards, and pay all your bills on time so you don’t cop penalty fees.
Book a chat with me to talk about your saving goals.