Fact: saving money is a cornerstone habit of wealth building.
You shouldn’t jump straight into investing if you don’t have a dollar to your name, nor should you constantly live paycheck-to-paycheck if given the chance to live otherwise.
That said, saving a good amount of cash per month is easier said than done. From emergency bills to random miscellaneous purchases, there are multiple ways for cash to flow out of your hands and into other channels.
But, let’s face it, a lot of these purchases are avoidable and unnecessary. You don’t have to buy those fancy new dress shoes at a discounted rate. Nor do you need to eat out every week, or every other week, for that matter.
If you want to reframe your mind and truly save smartly, thus opening your opportunities to reach long-term objectives, then you’re in the right place.
Here are six strategic money-saving tips to help aid you in your wealth-creation journey.
1. Plan Your Long-Term Objectives
Want to truly make progress when it comes to saving money? Then actively avoid saying that your goal is to merely save up money.
As odd as it sounds, we 100% mean what we say.
Not only is such a goal hard to quantify, but it’s also hard to maintain any semblance of motivation when there’s no true figure or objective that you’re working towards.
Instead of remaining vague in your sentiments, plan out your long-term financial objectives with SMART goal principles.
For instance, instead of vaguely aiming to “save up money,” define clear targets such as “save $10,000 for a down payment on a house in three years” or “accumulate $5,000 for an emergency fund within 16 months.”
This specificity not only makes your goals more tangible; it also significantly boosts your motivation since there’s a clear benchmark for progress.
Furthermore, having numerical goals allows you to reverse engineer your progress, allowing you to create micro-goals in shorter time frames. This makes achieving the goal an easier and more tangible task in your day-to-day life.
2. Automate Your Savings
A lot of people struggle with impulsivity as soon as their employer deposits their monthly paycheck into their bank account.
If you’re guilty of being tempted by mindless purchases (we don’t blame you!), then a good way to force yourself to save up money is by automating your savings.
This will require at least two separate bank accounts: one that’s solely meant for saving, and another to handle more immediate concerns like paying bills and the like.
To automate your savings, there are two ways to do so. The first is to request your employer to automatically deposit a percentage of your income in exchange for your labor to a specific bank account—your savings account, in other words.
If that’s not permissible, you can instead schedule automatic recurring transfers from your primary account (the one your employer deposits in) to your secondary account.
Many Australian banks have this feature, and you can give one of their agents a call if they can allow a similar scheme for your case.
Automating your savings helps discipline you to spend less with your earnings. Whatever you’re saving for is ultimately up to you—whether it’s a downpayment, a vacation, a car, or something else entirely.
3. Park Your Money in High-Yield Accounts
A lot of traditional bank accounts offer low interest rates of about 2–3% per year.
While the month-on-month growth is better than nothing, the risk of inflation and the sheer amount of alternative high-growth savings accounts out there make parking your money here a vastly inferior option.
If you want to exceed your purchasing power, then putting your savings in high-yield accounts is the way to go. For instance, several online banks in Australia have better interest rates than traditional banks due to low overhead costs.
High-yield checking accounts are also an option, offering account holders competitive interest rates granted that they fit the minimum transaction requirement set by the banking provider.
You can also park your savings in a time deposit, which can be worthwhile if you’re saving your money in the long term, such as for your child’s college education.
Using these alternative bank accounts to hold your cash can be a great way to gain a slightly stronger financial safety net per year, which can help minimize the brunt of rising inflation rates felt throughout the country.
This informative guide from Westpac can help you make tailor-fitted assessments with your term deposit and interest rates.
4. Clear Your Debt, and Fast
A not-so-fun fact: The average debt of an Australian household is $261,492 for the period 2021-2022. This beats the median gross annual income per year of most households across all territories.
Given this fact, it’s clear that a large number of households are struggling with debt costs with not much to show for it. One late repayment can cause the debt to incur a larger total interest net, causing your financial situation to be even more strained throughout the debt’s lifespan.
Furthermore, delayed payments can also tarnish a person’s credit score, restricting their ability to loan and acquire bigger assets in the future—which can be extremely limiting for business owners or prospecting homeowners.
To prevent this from happening to you, you should prioritize paying your debt before accomplishing any other financial habits. Pay off debt that carries the highest interest rate and focus on that. If possible, consider condensing all your loans into a single loan.
And before getting into more debt, ensure that you have a stable source of cash entering your bank account and some capital to boot.
By upholding proper debt-handling practices, you can make handling the rest of your finances a much simpler task.
5. Reduce Subscriptions and Other Expenses
Do you have monthly subscriptions that you or your family are barely using? Do you religiously buy a cup of coffee from an expensive coffee branch while you can make the same one at home?
Instead of having these products and habits drain your bank account each month, nip them by the root immediately. As simple as it sounds, lowering your expenses can work and add up in the long run.
If you find that you’re behind in your financial goals, don’t go to the pub with your pals and complain about it. Act rationally with your funds and keep your wallet close, especially if your long-term goal has a steep asking price.
Stopping mindless spending is paramount to smart financial literacy practices.
6. Track Your Savings
When it comes to money management, it’s always a good idea to be systematic when handling it. This is why large corporations have entire financial departments dedicated to ensuring that their money goes to the right places.
The same philosophy holds true for individuals. Without a budget, you’re making it harder for yourself to know where your money is going each month, which can make it hard for you to accurately change your behavior to improve your financial situation.
Conversely, having a budget keeps you abreast with all your money movements, big or small. It helps you know your monthly income, expenses, and current net worth. You can even make specific financial ratios through spreadsheet software to evaluate your financial health in more detail.
Tracking your budget is something you have to do every day, but doing so instills discipline and responsibility—which can help you stay committed to achieving your goals.
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