Our strategic partner, Elston, just released this informative article, which is a must-read for everyone with kids.
Some of their advisers recently visited the University of Queensland to present ideas for reducing financial stress. They knew that talking to students about saving money would be tricky.
Everyone in the audience is focused on passing their degree and getting the most fun out of life possible. Are you saving money? Isn’t that the opposite of having fun?
A boring concept like budgeting is challenging to sell but not impossible. Our presentation got the students thinking about things they could do now that could make a big difference later on. And even if partying was the number one priority at uni (after lectures, exams, and assignments), our tips could come in handy when they graduated and started climbing the career ladder.
If you have a child or a grandchild somewhere between school age and settling down with a family of their own, this article for saving money might be just the sort of thing you’d like to share with them.
Make a list
The most crucial step when you’re trying to save money is to make a list of all your expenses. Write down everything (and we mean everything) that you’re spending money on. That could be petrol, coffee, gym memberships, streaming subscriptions, etc.
There’s a good chance you’ll be surprised by how much small things, like yummy treats for your dog, are eating into your savings. Just about every purchase is a tap-and-go transaction, so you could quickly be overspending on things that feel like nothing.
Sort out the wants from the needs.
Now that you’ve got a list of all your expenses grab a highlighter pen and mark all the necessary items.
You need to pay the rent and buy groceries, and do you need your Cavapoo professionally groomed every four weeks? Maybe, but we’ll leave that up to you. These are difficult decisions to make, but they have to be made.
By the way, we’re not saying all your wants must be binned. Budgeting shouldn’t be about existing. It’s about controlling the wastage and making sure there’s room for the things you enjoy now and the things you’ll want to do in the future.
Think of your budget goal as a bucket.
As the diagram shows, the money that flows into your bucket flows back out again in four ways.
The percentages here are just an indication of what is often typical. They vary for different people and circumstances but are an excellent place to start.
60% goes to your regular expenses, those unavoidable costs that must be covered. This consists of daily costs like transport, weekly costs like groceries and a percentage of yearly bills like insurance.
10% goes to short-term savings
10% goes to long-term savings
20% goes to an emergency fund. It’s always good to have a buffer of cash that you can turn to if you encounter an unexpected expense, such as fixing the car or replacing the washing machine.
The above are all based on examples, which will differ slightly for everyone.
Set up separate bank accounts
Back in the days of cash, families often divided the notes and placed them into different envelopes. This physical division of cash ensured that the money was there when needed as different expenses occurred.
Of course, today, we don’t get paid in cash. However, we can replicate the envelope system by setting up different accounts. It’s a great way to push money into short—and long-term savings, ‘locking it away’ when saving for those new boots, a big holiday, or a house in the future.
Make impulses impossible
If all your money is in one bank account, it’s easy to tell yourself you have plenty of money. It’s such a simple trap to fall into.
Can we go to Bali? Sure, why not? The bank account’s looking pretty healthy.
Set up automatic transfers each payday so that short-term and long-term savings money gets siphoned off first. That way, the money in your day-to-day account is all available to you.
Rediscover your WFH habits
During the COVID lockdowns, we couldn’t go to the corner café to buy lunch, so we made our own.
Why not do that now? Imagine making a sandwich before leaving home. You could save yourself $60 or more each week.
Grab a mortgage calculator and do the math if $60 doesn’t sound much. An extra $60 a week could help you to pay off your home loan five years sooner!*
*Calculation based on: $500K loan, 30-year term, interest rate 6.24% with weekly principal and interest repayments of $770. Source: Repayments Calculator (commbank.com.au).
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