How can I start saving?

How can I start saving?

With such busy lives, sometimes it can be hard to know where to start when you make the decision to work on your financial position. Saving is a great place. Having that “rainy day buffer” can really help with your financial confidence and peace of mind. Sometimes people haven’t consciously saved since the primary school days of bank supported programs - your parents feed you a few dollars, you take it to school, deposit it and watch the balance flourish. It’s unlikely that you had the competing demands of rent, Netflix and The Outnet at school and your parents have probably retired their generous pocket money program but recommencing that weekly savings plan is a great place to build savings and feel in control of your finances.

Find your purpose

When you make the decision to save the best place to start is to set a savings intention. It might be putting away a percentage of your income or it might be a money figure that you have in mind for a certain goal such as purchasing a house/car/holiday or even reducing debt. Whatever your motivation, write it down and include the financial amount, the date you want to achieve it by and what the money will be utilised for. Your goal doesn’t have to be mammoth, just start somewhere. Saving success comes down to all the smaller, daily choices we make so having your savings intention visible to you will encourage you to stay focused.

Find your opportunity

Once you know what you want it is important to take stock of your current position – how will you create the opportunity to save? We recommend reviewing your current spending as a good starting place. You can use an app to help or export your last month of bank transaction into excel and start reviewing where your money currently goes. It’s good to think of each purchase within a category e.g. groceries/entertainment/clothing/eating out/rent or mortgage etc. Once you have considered each category it is time to start looking at the detail, ask yourself –  is it an essential spend item or a discretionary spend? Once you know which categories are your discretionary items then look at what expenditures you think you can change easily and quickly. It can be good to cherry-pick the big-ticket items first so you gain success and momentum straight away. Define the areas you are going to make changes and write down what action you are going to take.

Make it easy on yourself

Now you know where you can save, automate it. A big savings trap is when people think they will save what’s “left” after their weekly spending. You will achieve a lot more financial success by saving first. You know your savings goal so set up an automated transfer for the weekly amount to go into a separate bank account on the day that you are paid. It’s also best if this transfer is before the weekend – Friday to Sunday is prime time for going rogue on your new, frugal life. This avoids accidently spending your savings allocation because it is in your everyday account or being tempted to dip into your healthy bank balance.

You know what you want to save, by when and for what purpose. You know where the extra savings are coming from and you are focused on those behavioural changes that make it possible. You have set up the right structure for success by understanding your spending, understanding your savings potential, having a separate savings account and automating the transfer into your savings account. Next you need to keep an eye on things – monitor your progress. Chances are you will find it a lot easier than you think - often people don’t notice the lifestyle changes and the savings success fuels other big shifts in their money mind set and financial empowerment. The process hasn’t changed since the primary school days – do it regularly, stay focused and enjoy watching it grow.

Keiren Murphy