Money Saving tips from The A Firm Accountants
Saving money throughout your everyday life is one of the most powerful and effective ways to secure your financial freedom (and early retirement!)
But the subject of saving is often approached with unnecessary foreboding. It doesn’t need to be.
Saving money can be liberating, and most of all it can be easy: the best changes you can make – right now – are small, but consistent.
And who better to show you how to save than Australia’s most trusted accountants: The A Firm!
Set Aside A Portion Of Your Paycheck For Savings
One of the most important things to remember about saving is that it should be a regular occurrence. The best way to practice sustainable saving is to aim to put aside at least 20% of your weekly or fortnightly paycheck.
Establishing a large savings account – and to an extent, finding financial freedom – is a game of small contributions, made consistently, over a long period of time.
Saving 20% of your paycheck will add up overtime to a very healthy savings account.
Additionally, you can further split this 20% into sink funds, investments, or just saving up for a rainy day – which is always a good idea.
Why? Because did you know that one in three Australians admit they couldn’t come up with $500 in an emergency if they needed to?
Small, Everyday Changes Mean Big Benefits For The Future
Sometimes, the smallest changes can have the biggest results. One of the biggest expenses our expert accountants see over time is the consumption of daily coffees & takeaway lunches or dinners.
If the average Australian were to buy coffee five times a week and eat takeaway twice, it would equate to roughly $3,000 per year.
If that same person were earning $60k annually, then that spend is roughly 5% of their salary on coffee and takeaway!
Switching to homemade lunches, dinners and coffee is a surefire way to keep your savings looking healthy, and your expenses low.
More Doesn’t Always Mean Better
Unnecessary spending is the number one culprit of missing savings funds and cripplingly high liabilities.
Common liabilities can include:
- Loan for a flashy new car, when the previous car worked fine
- Buying a brand new car instead of second-hand, where the value depreciates almost 20% immediately upon leaving the car lot
- Buying a bigger, more expensive TV when an older model would have suited
- Frequent clothes shopping (particularly high-priced brands)
- Overextending on loans
- Excessive gambling
Some Australians make the mistake of thinking that once they get paid more, they can spend more too. This is a common symptom of “being stuck in the rat race.”
To escape this, surplus funds earned from cash windfalls, promotions & investments should be put towards either savings or investment portfolios.
This way, your assets and savings accounts will eventually outpace your expenses & liabilities.
A More Proactive Approach To Saving
Regularly contributing to your savings account is an incredibly important thing to do to secure a healthy financial future.
One thing to also consider in your pursuit of financial freedom is making (some of) that money work for you while it sits in your account.
This can be in the shape of:
- Rental properties
- Investment portfolios
- Bonds
- Index funds
- Super contributions
- Hiring the services of a financial advisor
Again, small contributions over a long period is the name of the game here. If you’re just starting out in investing, you’ll want to find a very safe option to regularly contribute to (Blue Chip shares & index funds are typically believed to be reliable) over a decade or so.
Your regular contributions will accumulate over the years to a sizable return.
However, if you are thinking of investing while you save, then always make sure you have enough savings set aside to see you through any unforeseen complications that may arise in everyday life.
Do Your Savings Fit The Bill?
Looking for a health check on your savings account? Our qualified and expert accountants here at The A Firm can help you save your way to financial freedom – give us a free call today!