A three-month holiday. A new, top-of-the-line mountain bike. A fancy degustation dinner at Tetsuya’s.
There are things or experiences that we all want — but more often than not, they’re simply dreams without plans. If you want to make your dreams a reality, it’s important to develop good saving habits.
Recently MoneySmart, a division of the Australian Securities & Investments Commission (ASIC), conducted an online ‘Money Goals’ poll to determine how and what Australians are saving for.
One of the key findings of the poll were the techniques used by successful savers. If you want to know how you can finally cross that item off your wish list, then read on!
1. Know how much money you need
Budgeting for some things is simple. Whether it’s a car, a bike, or even a house — it’s not hard to know exactly how much they’ll cost you upfront.
Then there are things like holidays. Flight prices are always changing, as are exchange rates and hotel costs. And let’s not even start on spending money! That single unplanned activity you stumble across in your travels may end up blowing your budget completely, or maybe it’s that expensive souvenir you simply can’t pass up.
To stay on track with your savings goals it’s important to list out each item, then do your research. Calculate how much money you’ll need in the worst-case scenario and use that as the figure you’re aiming for. It’s easy to want something but there’s some serious savings work involved if you’re actually going to achieve your savings goals!
2. Have a specific saving timeframe
How long are you willing to wait before you reach your savings goal? After all, that new Kate Spade handbag won’t take long to become last season. The two-door convertible you fell in love with in your younger years might not be so practical if you end up having a family. And no one really wants to be in their sixties or seventies before they can finally afford their first house.
Set a firm deadline for each thing you want to save for
Set a firm deadline for each thing you want to save for. Much like work or assignment deadlines, this date will be your motivator!
3. Have a clear savings plan
To successfully save for the things you want, you’ll also need a clear savings plan. Once you know how much money you need for each goal, and set a timeframes for them, you can work backwards and calculate how much you need to put aside each month or each week.
Yes, this will be painful. It may mean going drinking with friends only once a month, selling something to drastically reduce the overall amount of your savings goal, or sending the kids to public schools instead! The key thing is to ensure your targets and deadlines are realistic. Saving for that multi-million-dollar mansion in five years is probably out of reach if you’re on an average office worker’s salary. But you might be able to make the down payment for a modest house or apartment!
4. Regularly review progress toward your goal
If your savings plan has long deadlines, it’s important to stay motivated. The best way to do this is by constantly reviewing your progress. It can be a real pick-me-up to see you’re that much closer to your dream holiday, or the sexy convertible you’ve had your eye on for a while.
…identify periods where you’re not making any progress towards your goal
It also helps you to identify periods where you’re not making any progress towards your goal. Was it because of unexpected emergencies, such as a car breakdown or medical expenses? Or was it because you went on that shopping spree after a particularly terrible week at work or home? By critically analysing your financial habits, you can develop strategies to ensure you’ll stay on track to meet your savings goals.
If you like to see visible signs of progress (who doesn’t?) there are apps such as ASIC’s TrackMyGOALS, available on Apple and Android, which let you set, share, track and review your savings goals. You can also upload pictures of your goals to remind you just what you’re saving for!
5. Tell your family and friends
It’s much too easy to slack off if you’re the only one who knows you’ve slacked off. Accountability is another key motivator, whether it’s your family continually asking how you’re going, or the potential embarrassment of informing your friends that you can’t actually afford the awesome holiday you boasted about all year.
The more people you tell, the more people you’ll have to make excuses to — or explain yourself to — if you don’t meet your goals. And for those of you who prefer the carrot over the stick, if you choose the right people to tell, you’ll have a personal cheer squad to get you to the finish line of your savings goals!
This post was sponsored by ASIC’s MoneySmart website. Visit the MoneySmart website to get free and impartial information and guidance about all aspects of personal finance to help Australians make informed financial decisions. The MoneySmart website also has useful free tools such as mortgage calculators and budget planners.
featured image: TruShu