2020 was a year anyone could never have predicted. Never before has the concept of having an emergency fund been more meaningful to cover loss of jobs and income, and many people having to withdraw Super in order to stay afloat. Savings in years to come will be critical in order to build up those emergency funds and attempt to boost the Super balance again.
I have set myself a big and bold audacious goal of not buying anything in 2021 (for myself) that is not a necessity (think stuff like deodorant or underwear). I am not a massive spender anyway – but I do love a good sale, and generally end up buying stuff that I really don’t need, plus my COVID kilo’s have resulted in having to buy bigger sizes (which I don’t want to be a long-term thing) and as a result – cupboards overflowing with more clothes then I could ever wear.
Over the holidays, I cleaned out the pantry and linen cupboards and kids’ bookcase and cupboards – but still need to get to mine. But the goal will be clear out, and don’t replace! No spending in 2021. Whatever I “don’t” spend – will be saved instead.
I listed some of my basics below:
- Know where your money goes and what you spend your money on – look at your bank statements / credit card statements and work out what you are spending on hard earned moola on, and where it can be better spent.
- Pay off your credit card debt as fast as possible. If you have multiple debts – see if you can consolidate this on a lower interest rate and pay if off as quickly as possible. Otherwise, pay them off using the “domino effect” – choose the lowest balance, smash that. Once the first one is paid off, then you use the money you would have paid to pay that debt, to pay extra off the next debt and so on until they are all paid off.
- Start an emergency fund – like covering a major car repair, or if you become ill and cant work short term, or get made redundant (or a world pandemic hits ;-( ) this will be the funds that you can use to “survive” without income or cover a once off large expense without any hiccups. The recommendation is at least 3 months of your expenses, but it all depends on what you are comfortable with.
- Save first – either a % of your income or a fixed amount. If you are saving a fixed amount and your income increases – make sure you increase that fixed amount to be in line with the increase in income. Don’t save what is left over – or it will never be a priority. If you save first you will live on less.
- Automate that saving – Set up a direct debit into a savings account so that your savings are moved away from temptation straight away.
- Avoid impulse buying (this is my guilt! Hence the goal for 2021). Some suggestions are – avoid large shopping centres unless you really need to, don’t take your credit card with you when you go out, this allows some “think about if you really need it, before you buy it”, make a list before you go shopping and only buy what is on that list, don’t shop when you are hungry.
- Its never too late to start and no matter how little or how much – every $ saved helps.
- Change some habits
- Invite friends over where everyone brings a “place to share” rather then eating out
- Meet friends at the beach or park, take kids to free activities – like the museum or bush walking.
- Ditching your coffee will save $5 a day (work days 260 days, you will save $1300)
- Quit smoking or mid-week drinking – save $ and your health!
- Make ordinary things cheaper – take snacks, pack your own lunch, choose generic brands, carpool or cycle or walk to work. The savings will add up quickly
- Keep all your receipts for things that you can claim for tax and maximise your tax refund (or reduce the taxes you pay). On that note, save your tax refund each year rather then blow it!
Don’t make it all doom and gloom, give yourself a ‘blow money’ limit. You can use this for whatever you want to i.e., non essential purchases. This will allow you to remember that the splurge is not a daily habit, but has limits in place.
So, set your goals – the ASIC Money Smart website has a great savings calculator to work out how much you need to save to meet the goal. Don’t forget the power of compounding interest will help you reach your savings goals – but you need to start! And stay committed!