In the financial planning process, saving money often lacks the attention it deserves. Many people are excited about spending, investing and creating wealth, but the discipline to save can be the difference between long lasting success and losing it all!
The following top 10 tips should help you build the foundation for financial success in 2018 and beyond.
1. Create separate “goal” bank accounts
Splitting your bank accounts up with one for each goal helps to align your behaviours to your objectives. A car account, a holiday account, an education account or even a girlfriend/boyfriend/husband/wife account will help you to see what you are working towards. Then by allocating money to each account on a regular basis you are actively progressing towards each of these goals. Look for a bank which allows this kind of flexibility without charging you fees. You shouldn’t have to pay someone for them to have your money!
2. Automate transfers to your goal accounts each pay
Whether you are paid weekly, fortnightly or monthly, setting up an automatic transfer the day you get paid will mean you are “paying yourself first”. Instead of using hoping you’ll have some money left over at the end of the pay cycle to save, you can ensure your savings happen by setting up automatic transfers.
3. Track your spending
How can you expect to stick to a plan if you are not tracking what you spend? Doing a budget with our clients in one of the most eye-opening moments of our initial discovery session. It’s amazing what you can learn by looking at the cold hard figures. Once you know where you’re spending your money, you can make specific and targeted changes to increase your savings without decreasing the quality of your lifestyle. Tools which we use with our clients include Pocketbook and Moneysoft. Both now have useful apps for your device and have very powerful data analysis tools.
If you would like any assistance with setting up or using these tools, please get in touch with us and we can arrange to meet with you to assist.
4. Allocate financial windfalls to goal accounts
If you score a raise, get a tax return or have a cash birthday present, rather than spend it, send it across to one of your goal accounts. If you are living comfortably on your current pay, why not use the extra money to help achieve your goals!?
5. Build a financial buffer
Having a buffer in place, for example 3 months of wages, will mean that if an emergency arises, you won’t need to dip into your goal accounts, or worse, use credit a card.
6. Reduce credit card limits
A great way to save is by reducing the temptation to spend. A good guide is to only have you limit as high as your monthly income, so that worst case scenario, you can always pay off the balance within the month. If you think your limit is too high but don’t know how else you can manage, it might be worth discussing your money management with an expert. Your financial adviser can work with you to set up a budget which works for you.
7. Buy non-essential goods when they are on special
Where possible, take the time to seek out seasonal specials. Certain stores are better for this than others – some green grocers can offer great prices on seasonal fruit and veg and certain retailers, such as Aldi and Costco offer great prices for good quality products. Even with the clothing and fashion, certain brands offer great value for lower prices. Cheap doesn’t necessary mean ‘cheap’! The savings can be remarkable.
8. Organise outdoor activities with friends/family
Instead of spending a few hundred dollars at a fancy restaurant together, make the effort to organise a picnic in the park or the beach, or a home cooked meal as an alternative. Having lower cost social outings doesn’t just save for you, it helps your friends and family too.
9. Discuss with friends and family whether they truly want or expect financial gifts from you
Gift giving is an assumed must in many part of our society when it comes to birthdays and holidays. Giving is just one of 5 of the Love Languages however (alongside Quality Time, Acts of Service, Words of Encouragement and Physical Touch). How often do you get a present you really enjoyed? Or is it collecting dust in your basement? Be willing to set budgets for gifts amongst close family and friends, and challenge yourself to think outside the box when it comes to showing people how you love them.
10. Know what success means to you
The great investor of our age Warren Buffet often asks people if they know what success really means (see more Warren Buffet quotes here). If you are not clear on what you are saving for and how much it means to you, you can’t expect to be motivated to do it in the difficult times. Working with a coach is an important step to better understanding what you want and how to motivate and incentivize yourself to work consistently towards your goals.
What are your favourite saving tips? And what do you find challenging about save?