By : Mirage Ratnayake
Step 1 – Get a plan
DECIDE what you really want and focus on the most important goals – a car, holiday, retirement, or deposit for a home You might want the lot, but you’ve got to prioritise.
Estimate how much you can save by depositing funds at regular intervals, and how long it will take to get there. Establish a budget to make this happen and stick to it. The best time to start saving is now.
Step 2 – Minimise existing debt
Make regular payments off your cards or personal loans. Minimise your costs by taking a cut lunch to work – putting $5 aside daily can mean $1000 extra for Christmas.
Use layby during the year to shop at sales for Christmas presents rather than having a last minute spending blow out.
Cut bank fees by reducing the number of accounts you hold. Use cash instead of credit cards if you can’t pay off the monthly balance. Use a debit card if you find having a credit card increases your spending.
Step 3 – Maximise savings
Even small things like putting your change into a savings jar at the end of each day can make a difference.
Put away a small amount each payday into your bank account and set up an automatic deduction so you don’t have to think about it. Add any pay rises, bonuses, special payments or that tax refund.
Think ahead – is there a Christmas Club at work? If you put away $25 per week into such an account , it would mean $1300 in Christmas cash.
Savings are a security buffer to cope with unexpected expenses. As they build you will be able to think beyond day-to-day expenses and pay for larger things.
Step 4 – Set up separate savings accounts
Save for longer term goals such as a car, holiday or home deposit with special purpose savings accounts which are separate from your everyday transaction account. Special purpose savings accounts offer carrot and stick incentives (eg higher interest if regular deposits are made but penalties if money is withdrawn in a particular period).
When these accounts grow to larger amounts, move into term deposits, where there is limited access – and less temptation to spend them, leaving the growing interest to compound.
Popular new online savings accounts (accessible through an ATM and piggy backing onto your transaction account) pay top interest rates and cuts bank fees, while giving instant access for an emergency,. However, the instant access means tj are not for the weak willed.
Step 5 – Know your finances
Savings for retirement are best made through superannuation because of the tax concessions. Make extra superannuation contributions from your pre-tax salary (‘salary sacrifice’) . This will increase your retirement pension – and choices.