Financial Autonomy, this podcast and blog, exists to help you gain choice in life. To succeed with this goal, we need to put ourselves into a position of financial strength – debt paid off, investments generating income, and superannuation well-funded for our latter years. And none of that happens if our income doesn’t exceed our expenses. This is the definition of savings – the portion of our income that we don’t spend. In this piece I provide 10 ideas to help you save more. They’ve all either worked for me, or I’ve seen them help clients that I’ve worked with. I hope you can find a few you can adopt.
1. Set goals and milestones
This one is all about psychology. It’s much easier to save if you have something that you are working towards. We all get a mini dopamine hit when we achieve something a little challenging.
A parallel example might be in the area of fitness. Have you found it easier to go to the gym or get out for a run when you have something specific in mind that you’re working towards? From looking great on your wedding day, the challenge of completing a 10k or being beach wear fit for an upcoming sunshine escape, having a goal in mind helps you to take action.
So when thinking about boosting your savings, apply the same strategy. Set yourself a saving goal, break it down into milestones – perhaps monthly mini targets. Then tick off those milestones to provide you with the fuel to keep you on track.
And don’t forget to celebrate the wins, preferably without blowing all of the savings you just accrued.
2. Send that next pay rise to Super
Pay rises have been a bit scarce in recent years, but all signs are those days may be about to change. A really impactful way to boost your retirement savings is to salary sacrifice the amount of your next pay rise to super. You will continue to receive the same amount of cash in your bank account as you did before the raise, so it’s no crimp on your lifestyle. But your super fund gets a handy boost. We’ve modelled scenarios for clients who have an early retirement goal, and it can be that boosting super through your 30’s and 40’s, then retiring at 50 and just letting your retirement savings compound through until 60 or older, produces a really secure outcome. It certainly can achieve the brief of gaining choice.
Just be mindful of the contribution caps. This year (2021/22) they are $27,500. The total of your salary sacrificed contributions, your employer contributions, and any other tax-deductible contributions that you might make, cannot exceed this cap. If in any doubt, get some professional advice.
3. Pay yourself first
The idea of “pay yourself first” links to the Reverse Budget approach I cover in my Financial Autonomy book. The day you get paid, shift the amount you plan on saving across to your savings account. Don’t leave it until AFTER you’ve spent all your living money which is the default strategy for most of us when we don’t have a plan. Save first, then spend.
4. Eat more vegetables
Those hippie vegetarians are onto something when it comes to increasing your savings – meat is expensive. Perhaps you don’t want to go full vego, but could you switch to vegetarian dinners a couple of nights a week to reduce your grocery bills?
5. Transport changes?
Car expenses are one of the biggest items in most people’s budget. Could you walk more, catch public transport, or change to a more economical vehicle?
One common misstep I see is people being offered a novated lease through their employer to buy a car. They are sold the idea that this produces significant tax savings, which it very rarely does, but as a result they justify to themselves buying a far more expensive, typically brand-new car, than they actually needed.
Cars are an expense. Their value goes down over time, and they cost a fortune to keep on the road. A focus on cutting costs here could offer a significant boost to your savings capacity.
6. Gamify
Saving can be fun – who knew? It could be through the use of milestones as mentioned earlier, but another way is to focus on your Savings Rate.
Determine the percentage of your after-tax income that you saved last month, this is what’s known as your savings rate, and then see if you can beat that percentage this month. Track it in a spreadsheet, create a pretty graph, potentially even compare with friends.
(There’s a detailed explanation of how to calculate and use Savings Rates in page 38 of the Financial Autonomy book).
7. Are there subscriptions you could cut out?
Check your bank statement or credit card – are there subscriptions you could cut out? Business has moved increasingly to subscription models for the reliability of cash flow these arrangements provide. It’s great for the businesses, but it’s often not so great for you and me. It’s easy to say yes to $20 here, a bit more there, then forget about it – that is large part of the business model! Fight back. Take a few minutes to see that you are using all the subscription services that you are paying for. What could you prune?
8. Up your kitchen skills
We all know that one of the biggest parasites when it comes to money is takeaway food. A bit here, and a bit there, it never seems like much, but it can really add up. And the advent of UberEATS and friends makes it just so easy to stay in front of the telly and order in.
Reining in the spend on takeaway food can certainly boost your savings. Perhaps you set yourself a rule of takeaway only on a Friday, or no more than twice per week. Whatever works for you. Then think about how you can build up your kitchen skills.
Once as a new years resolution my wife and I set ourselves the challenge of cooking 1 new recipe every week. We just wanted to expand our cooking repertoire a bit. It was a great success. There were a couple of weeks we missed, but others where we did 2 new things in a week, so over the course of the year it balanced out. And that challenge increased our skills and our pantry, and today cooking is something a really enjoy.
9. Avoid consumer debt
If you don’t have the money for something, don’t buy it. Save up, then buy it (if you still want it). The exception is a home – that would take a lot of years of saving! But I’m talking about clothes, furniture, holidays etc. Between credit cards and Buy Now Pay Latter services like Afterpay, it’s super easy to go on a spending binge and then be stuck with the resultant hangover for month or years. I know for some people the trap is online shopping – that great looking top or another pair of shoes. It’s so easy to just click. Recognise where your weaknesses lie and consider how you might be able to save yourself from yourself.
10. Bring lunch from home
I touched earlier on the potential to increase your savings through upping your kitchen skills. Why not use those new skills to make a little extra that you can have for leftovers at work the next day? Alternatively, if you work in an office, pick up a few sandwich basics and leave them in the office kitchen. Butter, mayonnaise, chilli sauce, whatever floats your boat. Then at the start of each week, bring in a tomato or some salad, perhaps some deli meat, a few rolls, and away you go each day. A boost to your savings, and a health bonus too.
Well, there you have my 10 suggestions for helping you save more. To summarise they are:
- Set goals and milestones
- Send that next pay rise to Super
- Pay yourself first
- Eat more vegetables
- Transport changes?
- Gamify
- Are there subscriptions you could cut out?
- Up your kitchen skills
- Avoid consumer debt
- Bring lunch from home
I hope these ideas help boost your savings and in doing so, put you closer to gaining the choice in life that we all deserve.
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