Saving money is hard, particularly today – but it’s also the key to getting ahead. The good news is that with the right approach, you can make your savings happen a lot easier.
Saving more is possible, just four years ago our national household savings rate peaked at 24.10 per cent. But in the four years since, our savings rate has declined to only 2.5 per cent of income – or $48 weekly based on the average household income of $1,923 per week. The impact of this change is huge.
For a 30-year-old today, saving just an extra $48 weekly and investing this money based on the long-term sharemarket average of 9.8 per cent would mean an additional $750,061 in investments at age 65.
Finding a way to boost your savings even just a small amount makes a huge difference over time. There are four key areas most people miss the opportunity to save more and get ahead faster.
Mortgage repayments are one of the biggest line items in your household budget, and saving even a small amount in interest can make a big difference to your savings bottom line.
The statistics show that the average difference in mortgage interest rates for new vs existing customers across Australia is between 0.5 per cent and 1 per cent.
Based on the Australian average mortgage size of $640,998, this means if you haven’t shopped your mortgage around in a while you’re potentially paying between $3,204 and $6,408 more than you need to each year.
You should be reviewing your mortgage at least once a year, or getting a good mortgage broker to do this for you. Thankfully today technology makes this task a lot easier, you can use mortgage savings calculators to compare the full market and see how much you can save.
The statistics show that Aussies waste around $8 billion dollars each year on subscriptions they’re not even using. These days it’s so easy to set up a new subscription, whether it’s for technology, a gym membership, or some other convenience. But it’s just as easy to forget about these subscriptions and end up paying for something you’re not using or getting any value out of.
When you take the time to regularly review your subscriptions, you’ll save on average $1,261 annually. It’s generally best practice to keep all of your subscriptions coming from one account or one credit card, that way it’s easier for you to stay on top of them.
And if the idea of trawling through bank statements to figure out what you have and what you don’t, the quick fix solution is cancelling your credit card – that way you can opt back in to anything you actually want, and leave the rest to expire.
The market for utilities and insurance is highly competitive, and shopping around can save you some serious coin and deliver you some extra money to save.
Market data shows that for just electricity alone, the difference between the highest and lowest cost providers in the market is $1,300 yearly.
And thankfully, technology is making it even easier for you to shop around through comparison websites that do most of the heavy lifting for you.
Take the time to regularly review your providers and make sure you’re getting the best deal.
One of the simplest but most effective hacks for sticking to your savings plan is having a separate account for your day-to-day discretionary spending. The single area most people blow their budget is for food, entertainment, and your regular spending money.
When your budget for this money is mixed in with your bills and other money, or spent through a credit card, it’s a lot harder to see how you’re tracking on any given day.
Personally, I have a separate account linked to a debit card that’s just used for this sort of spending, and I pay a weekly allowance into this account – this way on any given day I have clear boundaries and know how well I’m tracking to my savings plan.
This sounds like something that shouldn’t make a huge difference, but it absolutely does. Consider separating your discretionary spending from the rest of your money to help you manage your savings plan better and create better spending habits.
Saving and budgeting is one of the least enjoyable parts of your money, but it’s also the key to your future success. In Australia we waste a lot of money on convenience, and by not being as on top of this as we should be – but when you do this it’s like you’re trying to fill a leaky bucket, one step forward and two steps back.
The four savings hacks covered here have the potential to save you at least $5,765 each year, which when invested would grow from age 30 to 65 to $1,492,348 – the juice really is worth the squeeze here.
Ben Nash is a finance expert commentator, podcaster, financial adviser and founder of Pivot Wealth. Ben’s new book, Virgin Millionaire; the step-by-step guide to your first million and beyond is out now on Amazon | Audiobook.
You can learn how to save more and invest smarter WITHOUT drastic lifestyle sacrifices through Pivot’s Smart Money Accelerator here.
Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstances before acting on it, and where appropriate, seek professional advice from a finance professional.
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