Set goals
The best starting point for saving is to have a clear finish line: your savings goal. This will give you motivation and purpose for saving. A savings goal could be a holiday, funds for home renovations or even as big as a new car. Whatever your goal is, it should be realistic and achievable based on your income and regular expenses (e.g. bills). You should also track your progress towards your goal by reviewing your bank statement, that way, you’ll know how far along you are, and if you might want to make cutbacks in other areas to speed up the process. Remember, don’t get down if you have a setback. Expenses can be unforeseen, and if you must dip into your savings, at least you’ll have the funds available in an emergency!
Create a budget
Whether you’re saving for a goal, or you just want better visibility over your savings, you can’t beat a budget.
Start with how much is coming into your accounts per month, and list all of your regular expenses (e.g., bills). Have a look at any past receipts for other purchases in the last month and calculate how much you may be spending incidentally (e.g., takeaway food and entertainment). Now that you can see what’s coming in and going out, consider where you could cut back and build your savings.
Use the 50-20-30 rule
A great method for budgeting is to use the 50-20-30 rule. What this means is putting 50% of your income towards essentials like bills, food, mortgage or rent and transport; 20% towards savings and debt repayments; and 30% towards the things you enjoy. That way, you’re keeping on top of your mandatory expenses, but steadily building your savings.
Prepare for big expenses
It’s worth looking ahead to the big expenses that you have coming up. These could be vehicle repairs or medical expenses. Being ready for these expenses will help you plan and ensure you have money available when needed. This will ensure you aren’t caught off-guard and out-of-pocket, reducing stress in the long run. You can start by setting aside small amounts weekly to make sure there’s enough to cover the cost when the bills arrive.
Reduce your debt
As part of your budgeting process, you should also look at the debts you have, and how much you owe for each. Next, prioritise these – you may want to start with the biggest amount first. By tackling the biggest debts earlier, you will be able to reduce how much money you pay in the long run due to ongoing interest rates and fees.
Need to save our tips for later?
Enter your email and click submit to receive a PDF of this page, along with other useful information from Kina Bank.