Savings habits you’ll never regret.
Do you lack the motivation to save? Or do you find that the concept of saving for a rainy day just doesn’t resonate with you? You’re not alone!
In our younger days, when the majority of us have minimal commitments and responsibilities, saving money isn’t usually high on the priorities list. Unfortunately, although we can maintain this outlook for a period of time, it is inevitable that we have to grow out of it at some point.
I’m not saying that you now have to become a boring, penny-pinching individual who gives up your social life in order to save every dollar. I’m saying enjoy the now but don’t sacrifice the future.
A very simple way to establish a savings habit is to automatically transfer a percentage of your paycheck to a separate account – if you never see it, you never spend it. Generally, the best place to put your savings is in a high-interest cash savings account. If you do this for a while, you’ll be surprised at how much you can save.
What should you save for?
To help you work out what you could save for, here are some examples of common savings goals:
1. An emergency fund
Example: 1 year’s worth of living costs
Having an emergency stash of money, such as a year’s worth of living costs, is a sound strategy. These funds will mean that you don’t have to go into debt when you need a car repaired, or you lose your job, or you’re faced with another costly situation.
2. Overseas holidays
Example: $4,000 per year
I’ve always said that a holiday is something that you earn, meaning it’s something you should save for. If you’re unable to save for a holiday, and you use your credit card to pay for it instead, how do you think you’ll feel when you come back with a large debt?
3. A new car
Example: $15,000 to $30,000 every 8-10 years
This goal can be quite subjective, depending on your life stage or how much luxury you’re after. Nevertheless, a car is an expense – and to fund a car purchase using another form of expense (i.e. car financing) will only make it more expensive for you in the long run. For the average person, the most cost- effective way to purchase a vehicle is to use cash.
4. A home deposit
Example: $100,000 (20% of a $500,000 home)
Although this is a substantial amount to save, if you can manage to put away a 20% deposit for your home purchase, it will save you having to pay any mortgage insurance.
To help break down how to save $100,000, you can view it like this: If you can save $400 a week into a cash savings account that provides a 2% return over the next five years, you could end up with a $109,000 house deposit.
To quote the great bodybuilder Ronnie Coleman, who knows a thing or two about achieving goals: Ain't nothing to it but to do it! When it comes to saving, there’s no point only talking about it; you just have to start saving.
If you want some help in establishing your own goals, please contact one of our Altitude Advisers. They may be able to identify strategies for you that will fast-track your savings.
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