Even though spending money is a lot more exciting than saving it, having a savings plan is an important part of managing your money. There are plenty of ways to save money, and with these nine tips you'll be one step closer to achieving the financial freedom you deserve.
1. Have a goal
Whether you're saving for a holiday, home renovations or adding to your retirement fund, it's important to set yourself a goal before you start. Work out how much money you need and how long it will take you to get there. If you have a long-term savings goal, break it down into smaller goals and reward yourself when you reach certain milestones. This will help keep you on track, focused and eager to continue.
2. Create a budget
By setting up a personal budget, you'll get a clear understanding of your current financial situation. A budget will help you understand your income vs expenses, and where you can potentially cut back to add to your savings. Your budget can help you stay on track, review your progress and reach your savings goal sooner.
3. Track your spending
You may be surprised about where your money is going. Use a budget tracker to keep a record of what you spend. You may not think that your regular coffee order will make a dent in your savings, but seeing the sum of two double-shot lattes a day may change your mind.
4. Pay off debt
With any money you have left over at the end of each month or pay cycle, consider using it to pay down some of your existing debts. This could save you thousands of dollars in interest over the life of your loans. Consider making extra repayments on the debt with the highest interest rate first.
5. Shop around for the best deal on your finances
Always do your research before taking out any credit product, like a credit card or loan. Look at all the product features including fees, interest rates and terms. Also review your annual insurance premiums and shop around to ensure you are getting the best deal and coverage.
6. Set up a separate savings account
Set up a savings account that's not connected to your debit card. Opening a separate account to your main transaction account makes it harder for you to dip into these funds. Look for accounts with bonus interest rates awarded when you don't make any withdrawals to help boost those savings. You can also name the account after your savings goal to keep you focused and motivated.
7. Automate your savings
Most of us are paid by direct deposit into a transaction account. Why not create some automatic transfers following pay-day to your various savings accounts to remove temptation? By building this habit, you'll continue to save without even knowing you are.
8. Change one spending habit and see the difference
Rome wasn't built in a day. Pick one spending habit that you can commit to changing and see what difference it makes to your long-term savings strategy. A small change could make a huge difference
- Don't let those leftovers go to waste. Replace buying your lunch everyday with eating leftovers or get in the habit of making your lunch every day. A saving of $5 per day on lunch over the course of a year could save you $1,300.
- Look at catching public transport to work rather than paying for expensive parking.
- Stick to your list when you go to the supermarket. Sure, those chocolates look delicious, but do you really need them? Stick to your list and avoid temptation in the supermarket aisles.
9. Make the time to review your finances and spending habits
Setting aside an hour every month to review your finances and budget could help you identify savings that could save you hundreds if not thousands of dollars per year. Review your bills and monthly statements to ensure you are getting the best value for money possible. If you aren't using a gym membership or subscription, ask yourself if it's necessary and cancel it if you feel you can live without it.
Your savings plan doesn't need to be complicated. By keeping it consistent and starting with one or two strategies you could find that saving becomes second nature and much easier in the long term. Your first goal should be as simple as getting started.