If you’re still reeling in shock after receiving your winter electricity bill, you may be concerned about the health of your bank balance. These strategies will show you how to get your savings back on track and help you to reach your home ownership goals sooner.
Pay yourself first
If you’ve ever been fortunate enough to get a pay rise, you’ve probably noticed that a peculiar thing happens: the more you earn, the more you spend. You have plans to bank that extra $400 a month, but somehow it always disappears. Similarly, if you’ve been able to successfully cut out an expensive vice, like smoking a pack of cigarettes a day, you may wonder why your wallet isn’t now bulging with extra twenties?
The fact of the matter is, saving money takes discipline and intent: it doesn’t just happen, so get going by creating a savings plan. Then, commit to paying yourself first each month before any of your bills and expenses. Most experts recommend starting by transferring 10% of your gross salary to a high-interest savings account; make sure it’s not linked to your ATM account, or you’ll be tempted to dip into it when your finances are low.
It may sound counter productive to spend money when you’re trying to save, but it actually works. The idea is to pay for everything you buy using cash – not EFTPOS, not a debit VISA card, not a credit card, but cold-hard currency.
“Spending cash constantly reminds us of the value of a dollar,” explains Frank, a software engineer who clawed his way out of $70,000 worth of debt by adopting some smart money strategies. “Buying a fancy $4 Starbuck’s coffee on plastic can become so much of a habit that we become oblivious to the fact that real money is changing hands… and spending cash makes it impossible to spend more than you have.”
Pay off your personal debts
Credit cards and car loans are not only a financial drain on your monthly budget, but they can also impact your ability to get a home loan once you’re ready to buy.
“It’s very important that you try and pay off your debt before purchasing your first home,” advises Alex Wilson from www.savingsguide.com.au. “It will limit how much money you can borrow, because the banks don’t like to see that the person they are lending money to is swamped with debt in any way shape or form.” Once your personal debts are cleared, that’s more money you can deposit into your savings account each month, which takes you one step closer to your home ownership dreams.