Effective Things To Do To Save Money – Part 1
Welcome to Part 1 of our multi-edition blog series, “Effective Things To Do To Save Money”, where our experts give you top-tips to jump-start your budgeting and money-saving goals.
How to stop spending so much money, save more, and track spending
Going back to basics – there are many reasons why having a “rainy day” fund is important. A recent 2019 report produced by ME Bank noted that approximately 40% of Australian households are living paycheck to paycheck – this would mean millions of everyday Australians spend their monthly income in full every month. Noting this is far from ideal, the MoneySmart Australian Government website encapsulates the sentiment on saving money perfectly: “The sooner you start, the more you can save.”
Teaching yourself good habits on spending less money, tracking your spending, and actively contributing to your savings regularly will be beneficial for the long term. As the old, cliche adage goes, “everyone has to start somewhere”, Whether you’re working part-time, saving for your first house, or looking at retirement options, there will always be ways for you to effectively save money.
Saving money is not always about not spending any money at all, it’s more to do with finding smart and easy ways to gradually reduce your recurring and/or ad-hoc expenses. These two starting tips can help you get started on the path to effectively managing the way you track spending and save money.
Tip #1: Setting a financial goal
Like with many accomplishments in life, the starting point is, more often than not, having a set goal in mind. This should hold even more true for your financial goals. Setting a goal will give you something to work towards, whether it be a new car, your first home, or even a holiday – starting with a set goal in mind is the first step.
An effective way to plan and define goals is by using the “SMART” goals criteria. Popularised in the Project Management sphere, SMART stands for:
- Specific – What do you want to do?
- Measurable – How will you know when you’ve reached it?
- Attainable – Is your goal reasonable?
- Realistic – Is the goal relevant to your circumstances?
- Time-Based – By when will it be done?
Start with an initial goal in mind and apply the SMART methodology to expand on it. An example of how a SMART goal would be structured as follows:
“I want to save $10,000 (specific) within 24 months (time-based), by putting $416.67 (measurable) a month from my salary (attainable) into a separate savings account because I will need it for my honeymoon by that time (measurable) .”
PROTIP: Always write down your goals (whether in a diary, planner, sticky note, in your phone, or on your desktop).
It will serve as a reminder and keep you accountable. In a study conducted by Dr. Gail Matthews, a psychology professor at the Dominican University in California, it was concluded that you’re 42% more likely to achieve your
goals if you write them down on a regular basis.
Tip #2: Set and follow a budget relevant to your personal circumstances
Note three keywords in the above subheading: “set”, “follow”, and “personal circumstances”. This tip builds on tip #1 above.
There are many (claimed) money-making gurus out there claiming to have found the key to financial freedom and monetary success. Their advice for investments can vary, and be questionable at times, but one thing which many will agree on is setting yourself up for success by creating a budget.
It’s vital that this budget is tailored to your current personal circumstances, financial capacity, and aligns with your future goals (something we mentioned above). The key things to consider are:
- Your net income – how much you earn
- Your recurring expenses – how much you spend and when it occurs
- Your SMART goals – how much you need to save
- Your personal circumstances – what stage of life are you at. Are things going to stay the same for a while or do you expect things to change i.e. getting married, retiring, having children etc.
There are many websites out there offering free budgeting tools such as moneysmart.gov.au and even within Google Sheet’s Template Gallery. Work out first how much of your income you need to put aside on a regular basis to reach your savings goal, and put that money aside (and even away from sight in a high-interest savings account) as soon as it hits your spending account. From there, work out your recurring regular expenses to make it fit within your budget (without considering the savings already set aside). It may take time to adjust to the new level of discretionary spending, but remember: this is a marathon, not a sprint. Get into good habits now and reap the rewards later.
Now that you have a starting point, actions speak louder than words. Work towards forming essential money management habits by focusing on the end goal, day in, day out. Track the progress of your financial goals and hold yourself accountable with a budget tailored to your personal circumstances.
Keep up-to-date with more budgeting, money-saving, and financial tips and tricks by subscribing to our blog!
Note: The information contained in the article should not be considered as licensed personal financial advice. It is important to determine if the personal opinions and views of the writer are suitable for your circumstances.
If you require personal financial advice, visit the following links to find a professional: