How to save money: 5 Super simple money-saving tips
For many Australians, the double whammy of stagnant wages and rising living costs, most especially housing, has made saving money more difficult than ever.
At the best of times, saving can seem like a pipe dream for many of us. However, 51.3 percent of respondents pay their credit card bills on time each month, according to a Savvy 2020 Financial Literacy poll. A further 41.75 percent of respondents use apps, such as the Budget Direct Money Manager app, to keep track of their spending.
Here are 5 things on how to save money to increase your chances of saving money successfully. Not only for short-term goals, such as a vacation, but also for long-term goals, such as saving for a down payment on a house:
#1. Make a budget
A budget is at the heart of any savings strategy. Budgeting allows you to prioritize your purchases and strike a balance between spending and saving over the course of a year.
According to MoneySmart, you can work out all of your normal expenses, such as rent or home loan, transportation, insurance, and electricity, by checking your credit card statements, bills, bank statements, and receipts.
These costs are then deducted from your income, which includes your full-time or part-time job, casual work, pension, government benefits, child support payments, investments, and so on.
If you're spending more than you earn, consider what you should eliminate or reduce.
“Think about which items you need for your basic living expenses and which are extras or things you could possibly do without if you needed to save some money,” MoneySmart advises when determining your financial priorities.
At the very least once a year, you can update your budget. Alternatively, if your circumstances dramatically change, you may want to check in more regularly (e.g. getting or losing a job, having a baby).
If you're spending more than you earn, consider what you should eliminate or reduce.
#2. Track your spending
According to MoneySmart, we can fall into the trap of thinking spending on big things is what gets us 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. Pay off your credit card
With credit card interest rates as high as 25% or more in Australia, it's easy to see how rash credit card use can derail even the most modest savings goals.
The easiest way to avoid interest and late fees is to pay your credit card in full and on time.
MoneySmart suggests setting up a direct debit payment to prevent missed payments. You should also pay more than the bare minimum, or you will end up paying a lot more in interest. If you can't be trusted with a credit card, Canstar suggests following your grandparents' lead and saying, "No credit, no EFTPOS." Simply take out the money you'll need for the week and stretch it.”
Given the advice above, it may seem counterintuitive, but Andrew Schrage, co-owner of Money Crasher Personal Finance, believes that using your credit card more creatively is one way to save money.
But there's a catch: Andrew says, "This tip only applies to those who pay off their balance on time and in full every month."
“Find a credit card with a great cash-back rewards program, and redeem your rewards every few months, then deposit the money into a bank account designated solely for savings.
#4. Open a savings account
Savings accounts can offer you a higher interest rate than a simple transaction account because they limit your access to your funds.
Savings accounts are where you can put some or all of your discretionary income (what's left after paying for necessities and taxes) as well as any windfalls (e.g. tax refund). Set up automatic, scheduled transfers from your main account (transaction account) to your savings account to avoid the temptation to spend this extra cash.
Rounding down your transaction account balance is a way to get extra money for your savings account, according to Kylie Travers, CEO of Occasio Enterprises, which owns and operates several personal finance websites.
“Every time you check your bank account, round it down and transfer the amount to your debt or savings,” she advises.
“If I logged in and my account balance was $109.35, I would transfer $9.35 to my savings account to round it down to $100. (or debt, when I had it).
“Some months, this resulted in a few hundred dollars being paid off without much effort, and I didn't mind.”
#5. Focus on recurring expenses
According to the team at The Thrifty Issue, while every little bit helps, it's your big, recurring costs that provide the most fertile ground for increasing your savings.
“Look through your bank statements and see what you've spent money on over the last year.
“Then see how much money you can save on them by refinancing your mortgage, comparing insurance providers, and other services, for example.
“If you spend a day going over everything, you can save thousands of dollars.”
While every little bit helps, the most fertile ground for increasing your savings is your big, recurring expenses.
According to Choice, switching to a cheaper energy retailer could cut your energy bill in half; the Australian Government's Energy Made Easy website allows you to compare electricity and gas offers.
Insurance premiums can run into the thousands of dollars per year, so a 10% reduction could save you hundreds of dollars.
Cutting your fuel costs necessitates constant vigilance: MotorMouth and accc.gov.au will tell you which service stations have the best prices and which days of the week are the best for filling up.
Ask your mobile and internet service providers if they have a cheaper plan, even though you're satisfied with them. They don't always share this information with existing clients.
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