Posted 19 months ago
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How long could you survive on your current savings? It’s a scary thought, isn’t it? If the unthinkable happened and you lost your source of income, would you be able to cover your basic expenses such as rent, food, car and mobile for long enough to get back on your feet? As much as we would all like to reply confidently that we’re in great shape, Australia has the dubious distinction of having one of the lowest household savings ratios in the developed world. A third of all people in our country don’t have enough in the bank to get them through a month without income, and a staggering 1 in 7 have no cash reserves at all. Statistics say that plenty of people reading this will fall into these categories, which is a sobering thought.
The prevailing wisdom is that it’s crucial to have at least 3-months’ equivalent of your current income set aside for a rainy day. Build that up to 6-months’ worth, and you’re well prepared for most of what life can throw at you.
Saving money can be a monumental challenge that many people struggle with. However, with some discipline, patience and ingenuity, almost anybody can build up a healthy nest egg. Let’s look at a couple of strategies that can get you working towards a financial buffer against hard times:
1. Pitch the Plastic
Your credit card might be your friend when your eyes latch on to that must-have item at the department store or boutique. However, it is arguably your worst enemy when it comes to squirrelling away a tidy sum as insurance against inclement weather. If the car has broken down, rego is due, or other unforeseen costs arise, and you need extra funds, you might be better off with an instant cash loan from Speckle. With lower fees and charges, flexible repayment conditions and plenty of support if you’re facing difficulties, Speckle is a significantly better option than racking up unmanageable credit card bills or, even worse, falling prey to payday loan sharks.
2. Build a Budget
An effective savings strategy requires careful planning. That can only happen when you have a solid grasp of your income and expenditure. It’s frightening how many people have little idea of how much they spend every month. You might think that the $4.50 for your regular morning latte won’t make an impact. However, that adds up to $135 a month and $1,620 per year! Not exactly chump change! Keep a record of every purchase, no matter how small. You’ll be in a better position to know precisely how much money you need, and how much you can set aside each month for savings.
3. Cut it Out
Now that you are the master of your expenditure domain, it’s time go through it with a fine-toothed comb and figure out what your need-to-haves, nice-to-haves and what-the-heck-did-I-buy-that-fors are. Be honest with yourself about what you can do without. Not that we have anything against lattes, but if you can make yourself a coffee at home and give your travel mug a workout, you’ve just found yourself $135 to pop right into savings every month. If you’re a smoker or regular drinker, cutting down on these expenses can be the quickest way to strike it rich. A few minor adjustments to your spending habits can be all it takes to help you stash away a healthy amount every pay check.
4. Put it Away
Your next step is to assign a monthly savings goal. It’s crucial to ensure that your target is aggressive, yet realistic. Aim too low, and you’re foregoing the opportunity to get further ahead, faster. Bite off more than you can chew, and you’ll quickly get discouraged. Choose a monthly amount that will challenge you, without making your life miserable. To ensure that temptation doesn’t get the better of you try a couple of techniques:
- Transfer your monthly savings amount into a completely separate account that you never use.
- Set up an automated transfer to this account the day after payday so that you won’t even register that it’s gone. Out of sight, out of mind.
- Consider rolling your cumulative savings into a quarterly term deposit account, where it’s locked away from your grasp and earning interest.
5. Stick to It
Think of a savings plan like a weight-loss regime. After all, you’re trimming fat off your monthly budget, right? Both require determination and discipline. You’ve assessed your budget, identified where you can cut costs and assigned yourself a monthly set-aside goal; now you need to knuckle down and stick to it like a barnacle to a whale’s behind.
6. Get a Gimmick
It might seem silly, but savings gimmicks really do work. There are all kinds of little tricks that you can use to squirrel away an extra few hundred or thousand a year. For example:
- Never spend a $5 note. Any time a portrait of the Queen comes into your possession, set it aside. You will be amazed at how much money you have stacked up at the end of the year. If five bucks is too rich for your blood, try doing the same with $2 coins.
- Do a daily change dump. At the end of each day, empty out your wallet, purse or pockets of all small change into a jar.
- Set up a swear jar and pop a gold coin into it any time you have a slip of the tongue. The dirtier the potty mouth, the higher the savings
At the end of the year, take the accumulated loot and dump it into your savings account.
If you’re concerned that the temptation to dip into the accumulated reserves might prove overpowering, technology is here to lend a hand. The digital age has brought with it a range of outstanding apps to assist investors in reaching their goals. Many of them gamify the experience, making it rewarding, fun and engaging. Apps such as Raiz (formerly known as Acorns), can offer simple, pain-free ways to save and invest for your future. Many financial institutions are also getting into the act. ING, for example, offer an “Everyday Round Up” account that will round up every purchase you make with their credit/debit account to the nearest $5 and syphon the difference into a savings account. Whether you go old-school or high-tech, it’s worth trying your hand at these and other options to find the formula that works best for you.
7. Cut Some Slack
While discipline is vital, we’re all human. Quitting cold-turkey works for some people, but most find they relapse very quickly. Saving money is no different. Cut yourself some slack and allow yourself to enjoy some little luxuries here and there. Just like a cheat day, they’ll help you stay motivated and positive about your goals, rather than miserable and resentful.
Good luck getting your savings on track! If you need a helping hand along the way, you know where we are!