7 ways to reach your savings goals
At the end of the month, do you find yourself wondering where all the money went?
It doesn’t have to be this way.
There are three ways to increase your savings: earn more, spend less... and make sure you’re getting the best interest rate. These 7 tips can help you get on your way to saving success.
1. Start with a budget
When you take the time to list out every expense you have each month, you should find some opportunities for quick win savings. To make it easy (and check you haven’t forgotten something – like car registration or the water bill), download a budget tool online.
2. Keep track of the cash
If you make a lot of ATM withdrawals each month and can't work out where all those small amounts of cash go, you can keep tabs on it all with an app like TrackMySpend. This free app was developed by the Australian Securities and Investments Commission, lets you flag an expense as a ‘need’ or ‘want’ – which helps you re-think that purchase (see tip #6).
Apps like TrackMySpend make you more conscious of what you’re spending – think of it as the financial equivalent of keeping a food diary. You can also share it with your partner so you’re accountable to each other for staying on track with the household budget.
3. Separate your rainy day fund from your savings goal
As a rule of thumb, you should have at least three to six months take home pay put away in an emergency fund. If you’re not there yet, work out how much you should be setting aside each month to get there – and stick to it. If you also want to go on holiday each year, set an annual budget and divide it by 12. You could set up two high interest savings accounts to avoid dipping into one to cover the other.
The most important thing, no matter how many savings accounts you have, is to pay yourself first. Set up a direct debit for the day after your pay goes into your account.
Apps like TrackMySpend make you more conscious of what you’re spending – think of it as the financial equivalent of keeping a food diary.
4. Could you earn more?
Increasing your income is a lot more fun than cutting back your costs – so if you’re overdue for a pay rise, put together a good business case and go to your boss. Or, could you find some extra sources of revenue? Look at car share sites like Car Next Door, sub-let a room on AirBnb, or clear out your attic and sell anything worthwhile on eBay.
5. Look for lazy savings
Still paying for a gym membership or home phone line you never use, or have a mobile phone plan or health insurance cover that’s more than you need? Do you forget to pay bills and end up with late fees? Get organised, compare plans, and you’ll easily top up your savings.
6. Be mindful about your spending
Every year, we spend billions of dollars on food we throw away, clothes, we don’t wear and services (like that gym membership) we don’t use.1 If you think intentionally each time you consider a spending decision, and look for value (rather than a bargain) you’ll find it easier to save.
7. Make your cash work harder
In a low interest economy, making sure you’re getting the best interest rate on your high interest savings account or term deposit is more important than ever. Letting your interest income compound will also help you reach your goals sooner – and make sure that hard-earned savings aren't eaten up by extra fees.
For example, let’s say you have $10,000 in savings in a 1.5% online savings account, and you deposit $1,000 a month for 5 years. During that period you’ll earn $3,045 in interest, and end up with a nest egg of $73,045.
But if that account earns 3% interest, your interest earnings more than double thanks to compounding – and you’ll have $76,263. That’s an extra $3,218 for doing exactly the same thing.
Once you take control of your budget, you’ll be more confident you can manage any unexpected expenses without going into debt. Plus, you’ll be surprised by how easy it is to boost your savings – and reach your goals sooner.
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