The cost of living in Australia continues to rise, making it more difficult for Australians to save their money. It can be difficult and stressful to manage and save money without the right procedures and guidelines in place.
We have assembled a list of money-saving techniques that can help you save more money for any occasion. Whether you are looking to save for retirement, buy a new home, or just want extra cash in your pocket, this blog is designed to help educate you to guide you through the process.
Employing a money coach, like a financial planner would also assist in setting up and monitoring your money management. Think of your financial planner like your own personal Chief Financial Officer for your personal finances.
Here a few tips to get you started.
Create a budget
Creating a budget enables you to track and plan your expenses and income over a period to reach your financial goals. Budgeting toward your goal relieves the headache associated with handling money as you already know where your money is going every period.
You can create a simple budget by following the steps below:
1. Calculate your total income for the budgeting period
Calculate how much income you are earning from all income sources. If one of your sources of income has irregular payments, use can use an average figure.
2. What expenses are essential
Figure out what current and future expenses are essential to maintain adequate living conditions. Such as food, water, and paying rent.
3. Track all expenses
Take note of all your current expenses. Cut back on the unnecessary spending habits you have in place. When looking through your expenses, consider removing all the items that you continue to pay for but never use, such as extra streaming services.
4. Set yourself a goal
Setting yourself a savings goal to work towards can motivate you to live a minimalist lifestyle that can save more money. Your savings goal should be conservative and should consider your income, needs, and your wants. If your goal is not conservative, you may stop saving as your budgeting actions are not sustainable.
5. Readjust your budget accordingly
To ensure your actions are sustainable, you can adjust your budget according to the events in your life as they occur. For example, you may adjust your budget if you are expecting a baby. This will require a change in your essential expenses and may change your overall savings goals.
Establish a cash flow system
Managing your cash flow is important to saving money and works in unison with your budget. Create a cash flow system that meets your needs.
1. Determine a savings goal
People in different stages of their lives have different savings goals, such as saving for retirement or saving for a house. When pursuing your savings goal, you should consider your income and expenses to set a realistic target.
2. Pay yourself first
Paying yourself first involves, prioritising putting your income into your savings account before paying for expenses. People typically pay expenses
first and often do not save any money as they run down their income. Consequently, people are left with little to no money to save for their future.
Many banks offer services in which a part of your income is automatically transferred into your savings account. This means you are paying yourself first before your monthly expenses.
3. Understand how your money flows
Reviewing where your money is coming in and where your money is going out can give you a good understanding of how your money is working for you.
Understanding how your money is being made and spent over the course of an entire year can help you generate more income and reduce expenses. For example, if you are expecting to go on a holiday at the end of the year, you may need to work more hours to make up for the expense. After reviewing your expenses, you realise you are spending money on items you do not need like fast food.
Reviewing the assets and liabilities you currently possess can also be beneficial. You may choose to contribute more of your income to assets that generate money and reduce income on liabilities that are generating expenses.
Know the difference between needs and wants
When you are saving money, it is important to know the difference between needs and wants. A need is an essential item that is required on daily basis, such as food, water, and shelter. A want is an item that you would like to have but is not essential, such as a new car, a holiday, and expensive clothes.
Needs and wants differ between people so it is important to understand your own. It is typically difficult to cut your spending on needs as they are essential items, although you can choose cheaper alternatives. Wants are easier to cut spending on as they are desired items and nonessential.
When looking to cut back on expenses, you should spend less of your income on wants and alternatively save more money.
Seek professional guidance
A Financial Planner can assist you in how to manage a budget and understand your cash flow requirements both in the wealth accumulation phase of life and in retirement planning. A Financial planner is your own personal money coach, or, put differently your chief financial officer for your personal finances.
Your Trusted Financial Planner
If you would like more information on how you can save money, why not speak to a professional? Forrest Private Wealth is a team of Perth financial advisors that specialise in retirement planning, asset management, and investment advice. Book a free virtual coffee with a Financial Planner at Forrest Private Wealth.