When it comes to growing your savings, it’s the littlest things that can make the biggest difference. If you feel like you’ve been treading water and battling to break even, it might be time to rethink your savings strategy. We’ve got six saving tips to help you put your best financial foot forward.
1. Save Yourself
When it comes to payday, people often prioritise their bills before themselves. You don’t need an elaborate plan to future-proof your finances, all you need is an automatic direct debit, some patience and the discipline to go the distance. The first step in saving yourself is to set up an out-of-reach, high-interest savings account and an automatic direct debit every payday.
Top Tip: If you automatically put away $200 into a savings account every month for 40 years, you’d save an extra $415,000 by the time you hit retirement age – that’s more than most Australian’s have in their super accounts.
2. The Marshmallow Experiment
In the 60’s, a psychologist conducted a study on delayed gratification. Walter Mischel used marshmallows to test if kids could hold off eating one marshmallow immediately in favour of receiving two if they wait. The study aimed to understand why some people can resist the sweet cloud-like fluffiness of a solitary marshmallow for a delayed reward.
It’s human nature to reward yourself for a job well done and as you watch your savings grow, you’re going to need to resist temptation and find other ways to reward yourself. Avoiding instant gratification is the golden rule to stopping the splurge spend and the best way to do that is to stop, wait and watch.
If 6-year-olds can do it – so can you! Check out the famous experiment here.
Top Tip: Replace instant gratification with looking forward to a reward. To make instant gratification less instant, try waiting 30 days before making any purchases that you would make on the spot. Instead of denying yourself gratification altogether, give yourself a goal or condition to achieve or ‘deserve’ your reward.
3. Cull The Credit
Have you ever thought about whether you actually need a credit card? A lot of people keep their credit cards close for those ‘just in case’ moments, but how many times have you ‘just in case’ bought a pair of shoes you don’t really need? Gold and Platinum cards charge you hundreds of dollars every year in fees just for the privilege of exclusivity, so if your bottom line means more than the prestige, do yourself a favour and cull the credit. Ditch the credit card for a debit card. That way, you’re only spending what’s yours and your spending isn’t costing you extra interest.
Top Tip: If you can’t live without your credit card, call your bank and adjust your limit in line with your monthly budget, that way there’s no way you can overspend.
4. The Subscription Suspension
From online newspapers and groceries to music streaming and exercise, these days, just about everything comes with a subscription. While you may think these are keeping your life healthy, they’re doing exactly the opposite to your budget. Take stock of your subscriptions and how often you actually use them, when you add up what they’re costing you each year; ask yourself if that money is better saved or spent?
Top Tip: Instead of paying for a full years membership, opt for pay as you go passes – that way you can budget better and pay for what you actually use.
5. Keep Tabs On Your Spending
Until you know how much your discretionary spending is actually costing you, it’s impossible to know how and where to cut back. The good news is it’s getting easier to track this with the evolution of software and apps that you can download to monitor your habits. Use an app to get smart with your spending and keep tabs on all of your incidental items for a month.
Top Tip: Conduct a little study on yourself. For a couple of months, measure everything you spend. At the end of each month – tally up your total spending, make some decisions about what’s not essential and aim to reduce those non-staples by at least 10-20%. By holding yourself to account, you’ll be making additional repayments on your mortgage in no time.
6. Get Savvy
Complacency will cost you, so get savvy with your spending and pay attention to your electricity, gas and water bill. Always be on the lookout for a better deal and as a matter of principle, never shy away from a negotiation. Take advantage of value bundles like phone and internet and home and car insurance deals. The same goes for clothes and groceries – wait for sales and don’t let convenience get the better of you, it always comes at a price.
Top Tip: If you’ve had your mortgage for a while, talk to your broker about a home loan health check. Simple things like refinancing or packing your loan with other products can save you thousands of dollars a year.
By following these six simple steps, you’ll soon see your savings soar and gain some ground towards achieving fitter finances.