Setting a savings goal for yourself is exciting. Your goal could be to put some money aside for emergencies or you may want to save for a home deposit, car, holiday or a wedding. Whatever your goal, once you start a regular savings plan you may surprise yourself with how much you can achieve once you put your mind to it.
If you have borrowed money at a high interest rate, make paying off that debt your priority before putting your money into savings.
How to achieve your savings goals
When you set a savings goal it’s important to get a savings plan together so you can make your dream a reality. After all, a goal without a plan is just a wish.
Here are some techniques used by confident savers:
– Set a specific savings target to work towards
– Have a clear savings plan
– Regularly review your progress
– Set a specific time frame to achieve your goal
– Tell your family and friends about your goal
– Check your bank statements
– People who review, remind themselves and publicly commit to their savings goals are more likely to achieve them.
Know how much money you need
The first step to achieving your savings goal is to work out how much money you need to save and how long it will take you to save that amount. If you prefer to write down your savings goals, use a notebook or type it down on a word document or an excel sheet.
Make some cut backs
To achieve your savings goal, you may have to cut back on optional expenses like entertainment, dining out and shopping. Record your everyday expenses, so you have a clear picture of what you are spending your money on, and where you can make some changes. You can also use our budget planner to see how much money is coming in and going out each week, fortnight or month.
Saving for a short-term goal
Short-term goals are things you want to achieve within the next couple of years. These goals could be to pay off your credit card debt, buy a new TV, go on a holiday or buy a car. Whatever you have in mind, set yourself a realistic timeframe.
The best way to save for short-term goals is to reduce your spending on non-essential items, like entertainment, dining out, memberships or subscriptions. It is often easier to stay on top of your spending if you use cash, EFTPOS or a debit card when shopping instead of using your credit card. See spending for tips on how to keep track of where your money is going day to day.
For those who are working, whether full time or part time, put your money into an account where it will grow. Savings accounts are great because you can earn compound interest on your savings. If you’re on a low income, you may qualify for one of the savings programs offered by some charitable organisations.
Saving for a long-term goal
Long-term goals are plans you want to achieve in around 5 years or more. This could include buying a home or paying off your mortgage, paying for your children’s education or saving for retirement. Think about investing some of your money. Get some financial advice to work out a good investment strategy to reach your goals.
Saving money for emergencies
Whatever your goals, it’s a good idea to put some money aside for emergencies. Keep this ‘rainy day’ fund separate to your savings and everyday money. As a guide, aim to save up enough money to cover your expenses for 1-3 months. Remember to keep this money for real emergencies and top it up again after you use it.
Courtesy of ASIC’s Money Smart