Building up your savings is something that takes time. It’s slow and boring, but the rewards are well worth it. I have developed several techniques and ways that have enabled me to grow a large savings over time. Its not fun or sexy, but they work.
OPEN A HIGH INTEREST SAVINGS ACCOUNT
Firstly, to grow your savings, you need a savings account. If you’re going to have a savings account, you’ll want to put your hard earned savings in an account that rewards you for your efforts. Go online, do a search on high interest savings accounts and choose the one that you believe benefits your situation and requirement.
CHOP UP YOUR CREDIT CARD
Credit cards are the ultimate way to kill your savings. I don’t own one, I never have and I never will. Why pay for something that the negatives far out way the positives. Don’t get sucked into the trap of the rewards and bonus offers they use to rope you in. There is no point in paying for something that you have to make repayments on that has a high interest rate on your repayments. If you can’t afford it with everyday account or from your savings, don’t buy it. Period.
DON’T FINANCE CARS
It took me too long to work this one out and it has cost me tens of thousands of dollars. As soon as you buy a car, it immediately drops in value as you drive out of the dealership. Not only that, it continues to depreciate in value over the course of your loan. By the time you eventually pay off the loan, your car has probably halved in value and you have paid all that interest on a car that is losing value day by day. Buy a car with money you can afford. Not having to make weekly car repayments is a massive way to add to your savings. Imagine if you’re paying $150 a week for a car over 5 years. Sure, that might not seem like a lot of money, but it is when you do the maths. $150 a week for 5 years or 260 weeks is $39,000. Imagine if you were putting that $150 into your savings each week, instead of a depreciating asset or as I like to call it a liability.
LIVE BELOW YOUR MEANS
Living pay check to pay check is literally the definition of not living below your means. If you’re living pay check to pay check, you’re living a lifestyle that you can’t afford and have no hope of growing your savings. An example of how I live below my means in my every day life that doesn’t change how I live are;
- I have an Iphone 7. This costs me $79 dollars a month that includes the phone, unlimited calls and texts, 20g of data and I get free streaming of AFL. Somebody who lives above their means has an Iphone Xs Max. They will pay around $125 a month for this phone. Over the course of a 24 month contract, I will save $46 a month and $1,104 at the end of the contract.
This is just 1 example of how I save money each month. $46 a month doesn’t sound like a lot of money, but this is just 1 item. Imagine adopting this to every aspect of your spending.
Other areas where I live below my means are grocery shopping, eating out at restaurants, gym memberships, clothes shopping, buying luxury items, not buying lunch and snacks at work everyday. Reeling in your everyday spending will give you a cash surplus at the end of the week and you will be able to put this money into your savings.
TRACK YOUR SPENDING
How many times have you got to Monday morning and looked at your bank account to expect to you money in there and you’ve got none? To add insult to injury, you don’t recall what you actually spent your money on. Simply by tracking your spending will give you more control of how much you’re spending. Keeping track of how much you spend will leave you with more money and more money to put into your savings.
SET A LIMIT
I set myself a weekly budget on how much money I can spend. I have a limit for my bills, my groceries and my everyday spending. If I reach my limit, it’s just tough luck. I don’t negotiate on the limit and say “if I transfer some money from my savings just for this I’ll save the difference next week.” This mentality doesn’t work. Setting limits on your spending eliminates the chance of tapping into your savings.
SAVE AS SOON AS YOU GET PAID
Now that you have tracked your spending and set limits on your spending, the next step is to save first, not what is left after spending. Saving first enables you to allocate a savings amount each week, guaranteeing that your savings account is growing each week.
ELIMINATE BAD MONEY HABITS
You probably have plenty of horrible spending habits that you don’t realise are bad. Some examples of these habits are;
- Updating expensive gadgets as soon as the newest model comes out.
- Drinking alcohol after work each night and drinking excessively on weekends.
- Going out to bars and nightclubs every weekend.
- Eating out at restaurants regularly and eating takeout
- Gambling and buying lottery tickets
- Buying the best and most expensive brands for all your clothing, food and household goods.
- Paying for memberships that you don’t use or paying ridiculous membership fees.
- Online shopping and using AfterPay.
- Spending more to get free shipping and bonus points.
- Grocery shopping without a list or meal plan.
- Not looking for the best and cheapest deals before shopping or buying items.
- Convenience spending.
- Luxury holidays.
This is a long list of bad money habits that are holding you back from saving more money. The sad part is, I could of continued on and on with the list. The good part is that I don’t possess any of those bad money habits anymore.
CUT THE COSTLY SUBSCRIPTIONS
Do you honestly need all of those costly subscriptions that you pay for? Netflix, foxtel, optus fetch, Apple Tv sports streaming and the list goes on. What’s wrong with free to air television. The best part about it is it’s free. Even paying expensive gym memberships for state of the arm equipment that you will only go to a couple times a week max or not at all. I pay for casual sessions at the cheapest price I could find or exercise outdoors for free. I get the same result for a huge saving. Those savings go into my savings account, not my everyday spending.
SELL YOUR UNUSED AND UNECESSARY ITEMS
How many items do you own that you don’t use anymore or hold no purpose to hold onto. Imagine how much money you could put into your savings if you sold all of the items you no longer need. You can add a big chunk to your savings by doing this.
SAVE YOUR PAYRISE OR BONUS
When tax time or end of the year bonus’ come around, the first thing people do is blow it all on poor spending habits. Getting these large incentives each year will grow your savings at a rapid rate. The big way you can also grow your savings is to save the difference when you get a pay rise. Just because you got a pay rise doesn’t mean that you have to change your lifestyle to suit this new raise. Continue living the same lifestyle you live now and save the difference.
This is a big one. How many times have you seen a clothing item or new product that you want to try that you must buy immediately? You buy it, regret it a couple of weeks later and it just sits there. Practising the art of delayed gratification will save you a fortune and grow your savings. Next time you want to buy those new shoes that just got released for a premium, put it in your shopping cart online for a minimum or 2 to 3 days and really way up if you need it or not. Even go a step further and right down the pros and cons of buying this product, ask the people in your life if they think it is worth it and if you should buy. Using this technique will save you from buying items that you don’t need and paying a premium for them. Take a holiday for arguments sake or a car. Instead of borrowing money to fund them instantly, why not save for them and pay for them outright with your savings instead of getting them instantly and having to pay a fortune in fees and interest. Delayed gratification is crucial to growing your savings.
There you have it, my complete guide to growing your savings. There is no magic pill or overnight plan that drastically grows your savings. It starts with discipline and persistence to stick to these new habits. If you can change your lifestyle, adopt these spending habits and make these hacks and traits apart of your lifestyle, I can guarantee that you will grow your savings at a rate you didn’t believe was possible.