Sometimes it’s not about where you spend your money, but rather how you manage it. While it may pay to be strict about what you can and can’t buy, such as cutting down on your daily Mango Passion Boost Juice so you can save for that new car, it can often be more effective to simply change your approach to spending.
An alternative to cutting specific items out of your budget, is simply changing the way you think about and handle your money.
So, here are five habits you can adopt that make saving money easier.
Set up automatic transfers
Once you have access to money that you know you can spend, it takes a great deal of self-control not to do so. Left to our own devices, most of us struggle with the discipline required to voluntarily give up something that we’ve just been given. Like our pay.
One way to overcome our tendency to spend on sight is to use what psychologists call a ‘pre-commitment device’. In the case of saving, that could involve setting a recurring automatic transfer on or just after your scheduled payday from the account in which your pay is deposited to your savings or investment account of choice.
You’ll be amazed at how quickly you’ll adjust to not having the extra money available to you. Out of sight truly is out of mind. If you never see the money, you can’t pretend you’re rich every two weeks and blow it on unnecessary stuff like pizza patterned Adidas hi-tops and solid gold phone protectors.
You can’t manage something if you can’t measure it, and the best way to understand your own saving habits (and improve them) is by keeping track of where those dollaroos go when they leave your bank account.
Write down, or electronically log, everything you purchase for no less than two weeks. This will help you identify patterns in your spending and take action to limit those that could sabotage your financial future. Like getting Uber Eats three nights a week .
Once you know what you spend on, how much and how often, it becomes a lot easier to create a savings plan you’ll actually stick to. This is then the perfect situation for you to set up those automatic transfers and double your saving efforts!
Use the Envelope System
One way you can force yourself to save is by implementing the Envelope System. This tried and true method of budgeting is a forceful way of ensuring you don’t overspend in specific expenditure categories.
The system itself is super simple. All you have to do is calculate how much you typically spend in a pay period for each cost category (i.e. groceries, clothes and eating out) and write each figure on a separate envelope.
When you get paid, withdraw the total sum you’ve decided will cover costs and fill each envelope with the amount of money written on the envelope and transfer all remaining money into your savings account.
Physically seeing how much money you have to spend will help to reel in your splurging tendencies, especially if you abide by the rules of the Envelope System and forbid yourself from spending money on categories whose envelopes are empty. Got no cash left in the takeaway envelope? Time to grab some ingredients from the fridge and get cooking.
And don’t forget to reward yourself if you manage to stay under budget, because all budgeting is better with chocolatey incentives.
Research before you shop
Supermarkets understand the power of impulse shopping. That selection of magazines, lollies and chocolate calling to you as you wait your turn in the checkout aisle isn’t there by accident.
These are ‘little indulgences’ we might be tempted to succumb to, given that, hey, a $2.50 Cherry Ripe pales into insignificance compared to the mountain of groceries in your trolley.
If only impulse shopping was restricted to the occasional sweet treat that would probably not matter too much. There are, however, wardrobes, garages and storerooms with long-forgotten items bearing testament to the power of impulse shopping to deliver a short-term pleasure at the cost of long-term financial security.
By shopping around before impulse buying you’re doing your wallet a massive favour because chances are you can find that waffle iron you’ve got your eye on at David Jones for half the price online.
All it takes is whipping your phone out, Googling the product and then clicking the shopping tab to know if you’re really being offered a great deal or just being completely swindled.
Avoid spending triggers
This one’s simple but effective – if you know you can’t resist Myer stocktake sales, don’t go to the mall during June.
If you know you can’t go to the movies without getting the $35 jumbo combo meal, wait for it to come out on iTunes. And if you know you can’t go to IKEA without buying an entire lounge suite, don’t go.
Basically, if you know what triggers your inclination to spend up big, you can avoid them and save yourself an absolute fortune in unnecessary sprees.
Level Up Your Savings Game
There is no wealth creation without investing, and there’s no investing without first being able to save. Get your savings strategy right early enough and the rest gets a lot easier.
Not sure how much you should be saving and how much to keep in an emergency fund? Try our free Financial Health Check today.