Author: Kinglsey Smith, Chartered Accountant, RSM Bird Cameron.
Strategy 1: Get Serious
With home loan deposit requirements for home buyers often around 20 per cent of the purchase price and proof of a personal savings history a common requirement for securing a loan, a real saving strategy has never been more important for home buyers. Saving money however is not easy; it takes self-discipline, dedication and above all determination. Only by knowing exactly what you want are you going to be able to get there. So the first place to start is with a plan; set yourself some goals and know exactly what you want and when you want it. The clearer the goal the easier it will be to attain. Becoming a serious saver requires a real change of attitude. You're going to have to be prepared to go without some of the things you're used to. But rather than thinking about what you're missing out on, think about what you're gaining. Yes you may have to start skipping Friday lunches at the pub, but you’re on the path to owning your very own property. Tell yourself this regularly. Savings Tip: Keep your eyes on the prize with a reminder of your goal firmly in sight, such as an image of your dream home on the bathroom mirror
Strategy 2: Know Your Finances
It's impossible to manage your money if you’re not monitoring where it's going so take the time to really analyze your cash flows. A great way to do this is by monitoring your spending for one month, both fixed and discretionary. Write down exactly where your money goes each day - you may be surprised on where a lot of your money is being spent. From here you'll be able to determine exactly where you can reduce costs to bolster your savings potential as well as what a realistic savings plan will be. Once you've determined how much you'll be able to save, create yourself a monthly budget, or financial plan. This is the only way to manage and maintain control of your money. If you're looking for some guidelines jump online; there are many websites offering budget templates and calculators. Savings Tip: Be realistic. You can't take all of the fun out of your life or you're likely to wind up depressed and exasperated. Set aside a small allowance each month for those special things you really enjoy.
Strategy 3: End Debt
If there's one thing that can really get in the way of saving its debt. The interest paid on credit cards and personal loans can easily strip away any savings and makes achieving your goals much harder and slower. So reduce and eliminate any personal loans and credit cards. And before you say sometimes you just need a credit card... don't. There are plenty of debit card facilities now available which serve like a credit card but only take money you already have - a much safer option. Savings Tip: Look for alternatives to credit cards if you don't have the cash up front. Lay-by for instance is a great solution when it comes to shopping. And for larger purchases, such as holidays or dental visits, ask about paying by installments. You may be surprised at your options.
Strategy 4: Automate
When it comes to putting away money, the best way to do this is by taking it out of your hands. Set up an automatic savings account which will withdraw and set aside your chosen amount every week/fortnight/ month making it much easier for you to stick to your budget. There is a wide range of savings accounts currently on the market so check out what your bank can offer you but also take a look on the internet. There are a lot of lenders offering competitive interest rates on online savings accounts, many with attractive offers for new customers.
Savings Tip: When choosing your account don't forget to check how often interest is calculated and how often it is paid. While putting money away will help you get ahead, it's the interest on your money that can give you a boost.
Strategy 5: Evaluate
Revisit your savings plan regularly. If you're struggling don't give in, simply adjust. Perhaps you've been a little too ambitious. If you encounter some unexpected costs which means you can't meet your regular goal one month, don't be upset or disillusioned, that's life. Simply get back on track the following month. On the other hand, if you're finding your savings plan a little too easy and you feel you could do more, then do so.
Savings Tip: Remember, saving takes time so don't be disillusioned if it doesn't feel like you're getting anywhere. Create smaller goals so you can celebrate milestones along the way so it feels like you're getting somewhere.
For further information on this topic, please contact RSM Bird Cameron.
DISCLAIMER:This information is of a general nature only and does not constitute professional advice. We strongly recommend that you seek your own professional advice in relation to your particular circumstances.