Without savings to back you up, life can be challenging when you have a financial emergency. There’s also the underlying stress and worry that exists when you don’t have a savings safety net.
If, like many Aussies, you have less than $5,000 in cash savings, then the idea of building up your savings and achieving a solid financial future can seem difficult. The good news is that regardless of where you are starting from, you can make it happen one step at a time.
Be kind to yourself. It’s vitally important not to beat yourself up over any perceived financial missteps. We’ve all made money mistakes. While it can be useful to glance in the rear-view mirror, it’s more beneficial to concentrate on moving forward to take control of your finances.
Apart from the timeless advice of living on less than you make, here are a few ways to build your savings regardless of how much you earn.
There’s no two ways about it, if you want to get ahead then you must have a budget. Creating a written budget helps you to make healthier choices with your money and accomplish your goals.
A budget is a roadmap for where you want your life and your money to go. Far from holding you back, a budget helps to achieve the life you’ve been chasing through making the most of your income. If you’re just starting out with budgeting (or getting back in the flow) check out our tips here.
Examine your budget for small changes that you can make across all areas.
Every spending decision makes a difference especially when your budget is tight. Start saving money by implementing small changes. For example, make your lunch instead of buying it – odds on you’ll eat healthier as well. Small actions add up over time and make a big difference.
Automating your savings is one of the best ways to accelerate your progress. Have your employer deposit a percentage or dollar amount from each pay into a separate savings account. Placing these savings in a standalone account (even at another bank) will isolate it from your everyday money and reduce temptation.
Directing your savings to a separate account is a great way to “hide” money from yourself. When your savings balance is not in front of your face, you can enjoy the feeling that you are moving ahead and achieving your goals, without having to stare at the growing balance each time you log onto your everyday internet banking.
By all means check in on your savings progress, but you don’t need to see it every day or even every week. The most important part is that you have a sense of security and comfort that your savings are growing, and your emergency fund is building each pay cycle.
Insurance premiums can be among some of the larger regular expenses that we have in our budget. It’s wise to compare prices on car, home and contents, private health, and personal insurance every couple of years.
No claims and loyalty discounts may make it seem appealing to stay with your existing insurance company. But it’s still worth making a comparison as you may save by switching. Think about multi-policy discounts as well; insurers will often provide a hefty discount when you bring more of your business to them.
Finally, look at the excess in place for your various insurance policies. As your emergency fund grows you can examine your options and consider what works for you. The higher the excess, the lower the premium – however, be careful as you need to have this money on hand in the event of a claim.
Using a written budget will ensure that you learn how your finances operate. You will come to understand your regular ongoing expenses, even as you prioritise savings and remove debt from your life for good.
Of course, every pay cycle is different and adjustments to your budget should be expected. However, you will find your budget baseline, and get yourself to a point where you figure out the best amount to place into savings each pay cycle.
Importantly, once your savings hit your nominated account, you never make a withdrawal unless it is a genuine emergency, or you are moving some funds into a longer-term investment.
The right plan can help you take control of your income to grow your savings, clear debt, and build wealth.
