As a kid, one of the first lessons we all learn about money is how to save – you know the drill, $1 in the piggy bank each week and pretty soon you’ve got yourself your first toy, bought with your very own money.
As we get older, the toys seem to get bigger, and so do the price tags.
And then, we start to get impatient……….. Why save to buy something tomorrow, when someone else is more than happy to lend us the money today?
Welcome to the world of ‘interest-free credit’ and ‘0% interest on balance transfer’ and ‘layby’ and now stores are offering ‘afterpay’ for online purchases. There is no end to the ways we can get what we want right now, and (work out how to!) pay for it later. And so starts the love affair with that four letter word – DEBT!
Don’t get me wrong – debt has its place, and can be a very powerful tool to build wealth and improve your lifestyle. But learning how to save is a basic skill that everyone should learn and maintain throughout their life.
How to start saving
There are basically two ways to save:
- The hard way
By trying to establish a strict budget for yourself, and reduce your spending, so that at the end of the month you have enough left over for the savings piggy bank.
- The easy way – pay yourself first!
By automatically directing 5-10% of your income into savings as soon as you are paid, you can merrily go about spending everything else and know that the hard work is already done.
By always paying yourself first, you won’t overcommit yourself to buying stuff that is beyond your means, and you’ll be far less reliant on credit when the big ticket items come up.
Where to put your savings
As with everything, it depends on your circumstances. There are a myriad of higher interest savings accounts on the market at the moment, but if you’re already in debt, paying extra off your loans may be the best form of savings.
Another option is to automatically direct part of your savings into your super – this can be extremely effective as the money is locked way until you meet a condition of release, typically retirement – nothing like a bit of forced saving discipline.
So what are waiting for?
Regardless of your financial position, a regular savings plan can give you peace of mind and a sense that you are in control of your finances. And, when you spot that next ‘toy’, it’s a great feeling knowing you can pay for it with your very own money!
If you would like to discuss how to get started with your savings, and work towards your goals, call Victoria.