OHMYGOSSIP – Saving can seem like a pipe dream for many of us at the best of times. But according to a 2020 Financial Literacy survey from Savvy, 51.3% of respondents pay their credit card bills on time each month. A further 41.75% of respondents also keep track of their expenses with apps.
Here are 11 things you can do to boost your chances of successfully saving money. Not only for your short-term goals, like a holiday, but long-term ones as well, like building up a home deposit:
#1. Make a budget – do not spend more than you earn!
At the heart of any savings plan is a budget. Budgeting helps you prioritise your expenditure and find a balance between spending and saving across a whole year.
By checking your credit card statements, bills, banks statements and receipts, you can work out all your regular expenses, such as your rent or home loan, transport, insurance and electricity. You then deduct these expenses from your income – your full- or part-time job or casual work, pension, government benefits, child-support payments, investments, etc.
If you’re spending more than you earn, ask yourself what you could cut out or cut back. When working out your money priorities, think about which items you need for your basic living expenses and which are extras or things you could maybe do without if you needed to save some money.
It’s advisable to update your budget at least once a year. Or more frequently if your circumstances change significantly (e.g. getting or losing a job, having a baby).
If you’re spending more than you earn, ask yourself what you could cut out or cut back.
#2. Track your spending
You can easily fall into the trap of thinking spending on big things is what gets you into trouble, when often it’s the little things that end up costing us more.
That’s why it’s important to keep track of your day-to-day spending, so you don’t live beyond your means. Your bank statement will tell you how much money is going into your bank account and how much is going out. You can then compare it with your budget to see whether you’re sticking to it or not. You can then identify areas where you can save.
Just the thought of having to track our spending can ward off impulse purchases.
#3. Do not use credit cards
Stop using credit cards!
#4. Open a savings account
By restricting access to your money, savings accounts can give you a higher interest rate than a basic transaction account.
Savings accounts are somewhere you can put some or all of your discretionary income – the amount left over after paying for personal necessities and tax – and any windfalls (e.g. tax refund). You can ward of the temptation to spend this discretionary money by setting up automatic, scheduled transfers from your main account (transaction account) to your savings account.
#5. Focus on recurring expenses
While every little bit helps, it’s your large, recurring expenses that provide the most fertile ground for boosting your savings. Go over your bank statements and look at all the things you have spent money on over the past year. Then see how much money you can save on them by, for example, refinancing your home loan, comparing insurance providers and other services. Spend a day going over it all and you can save thousands.
#6. Control your impulses
Credit cards, ATMs and online shopping make it easier than ever to spend money. Especially on things we want rather than need; the extent to which we succumb to temptation typically boils down to our willpower. Studies have shown that self-control is a bit like a muscle that tires out with use.
Ironically, it’s the willpower of poorer shoppers that tends to get depleted the most. This is a result of the fact they face repeated, difficult financial decisions.
“It’s not that the poor have less willpower than the rich,” says the American Psychological Association.
“Rather, for people living in poverty, every decision – even whether to buy soap – requires self-control and dips into their limited willpower pool.”
If you see something you want, wait at least a day before you buy it – 30 days if it’s a non-necessary big purchase. You might find the urge passes. Another way of short-circuiting your impulse to buy is to work out how many hours of work the purchase price represents; chances are you’ll think the item’s not worth it.
#7. Smooth your bills
‘Bill smoothing’ is a payment system offered by utility providers (electricity, gas, water) whereby you pay them fortnightly or monthly, instead of having to pay the whole bill in one go.
It protects people on tight budgets from bill shock and having to go into debt and potentially pay interest.
Adopt a similar approach with your everyday finances: regularly squirreling money away to pay large bills down the track.
#8. Plan your meals
Meal planning is one of the easiest ways to save money. If you know what you’re eating for the week and have shopped accordingly, there’ll be no need for random visits to the supermarket. Extra visits result in your spending more money and even wasting food. It will be even easier for you to stay within budget by buying all of your staple items at lower-priced stores.
#9. Become a ‘promiscuous consumer’
If you’re a brand loyalist – someone who repeatedly buys a product or service – beware.
Chances are the vendor in question knows you’re less price sensitive than most prospective customers. They could be taking advantage of your loyalty or, worse, taking you for granted by charging you noncompetitive prices.
Don’t allow your emotional connection to a vendor to get in the way, start looking for a better deal elsewhere.
Just the threat of leaving may prompt a better offer from your current supplier. They’ll understand retaining existing customers is usually far cheaper than winning new ones.
And if they don’t give you a discount or free upgrade, for example, don’t despair. More than likely, there are other companies lining up to give you a good introductory deal.
Don’t allow your emotional connection to a vendor to get in the way, start looking for a better deal elsewhere.
In short, you should become a ‘promiscuous consumer’! Not only will being loyal not get you a better deal, it’s almost certain to end up costing you more. Make sure you have no brand loyalty and are willing to switch whenever a competitor offers better value.
#10. Avoid a poverty mentality
Many people consider thrift – using money and other resources carefully and not wastefully – a virtue. However, while thrift is an obvious way to save, we need to guard against being too frugal. Ultimately, the only way to get ahead financially is to focus on earning, saving and investing. Focusing on skimping on the grocery and electricity bill will only get you so far, and puts you at risk of a poverty mentality.
A poverty, or lack, mentality is one preoccupied with a shortage of money: all the things the person doesn’t have and can’t get.
These people tend to have self-limiting beliefs and to make decisions based on fear of loss or failure. In contrast, people with a prosperity, or abundance, mentality base their decisions on what the possible benefits are.
#11. Use our savings goal planner
Use a savings goal planner to work out how much you need to regularly set aside to reach your savings target; and what discretionary spending you could cut in the process.
Featured image: Pexels
