Any strategies on how to save ? - Property or Shares

"Cut your coat according to your cloth"

I am sure we all aim to save to achieve our targets but is there a special formula, method or strategy do you use?

I consider myself a good saver and don't buy things randomly but still building a bank balance is kinda hard for me and these days it is very important if I want to invest in property or shares.

I have read few posts about debt recycling (borrow money yo buy shares and get divis while paying interest) but I think that is based on one's risk appetite.

Is anyone else also struggling to build their bank balance, save to invest?

 

As a lifetime hopeless saver the only thing that worked for me was enforced saving - the discipline of a big mortgage,

Also taking money out on payday to invest so it was never available to spend.

 

How does that work ?

So you wasn't parking money in your offset ?

 

I think its more of a mental play. Any money put side for the loan is marked as untouchable, so you’re less likely to overspend whats left.

Personally I find separating my spending into envelopes for different needs helps. $xx on train tickets, $xx for groceries, $20 for myself to enjoy on a cheap PS4 game or some other small trinket. Being brutal about what is essential spending and what you can trim down helps I find.

 

2xsalary rules, while you on your way to 2 salary rules learn to be a good investor or skill at deploying capital (shares, properties whatever asset that generates income).

Once you get it, it is easy sailing and you let compounding and time do the magic work
but you must learn the skill to deploy capital for a decent return.

I don't have a budget or spreadsheet, you need discipline and patient and to pay yourself first, you need the discipline to save and not touching the saving, be it extra mortgage repayment or regular investing every pay day in the stock market, then you can spend the rest of the money.

I don't settle for normal mortgage repayment I always pay double or triple when I get a windfall from shares I pay even more etc...

There is no single rule that fits everyone but you get the general ideas and applied it to yourself and your circumstances based on your risk appetites.

 

I have nade some changes to my share portfolio and any sum of funds I received went into my offset account along with my saving.

Other than monthly (phone bills) , quarterly (council, strata and water) bills and yearly insurance (all types) bills we only spend on groceries or random toy purchase for my bsby boy.

We also keep few hunderd at home for a rainy day but that's pretty much it.(once in a month eat out but not manadatory).

 

Spend less than you earn is the simply way or earn more income and keep you expenses the same.

There are forced saving - e.g. mortgages where yes it is an expense but you are investing/saving for your future.

You can either save a certain % of your salary - e.g. 5%, 10%, 20%, 50% or 100% (needs another revenue stream such as partner or an established portfolio of investments). I saved over 100k by the age of 24 (solo) getting ready to purchase my first place but takes persistence and dedication.. Although I wouldn't want to go through this now but we are in a different position, however if push came to shove and we lost everything then yes we would do this and in less time but this is why we don't risk everything we have worked hard.

Have no 'bad debt' such as credit cards, personal loans, car loans etc - they charge interest on something that is depreciating or cannot trade any value of it (e.g. holidays). I use cash for most everyday expenses and large purchases e.g. holidays, fuel, food, wines etc - well cc for points and a free month before we are charged interest but it is paid off before interest.

To increase income either look at doing additional work, could be uber or getting cash jobs - gumtree, airtasker, restaurants - you should declare income though

There is no magic way with everyone's situation is different along with their timeframe plus risk profiles but it really comes back down to cut all spending you don't need. There was a guy who used to work at my work place who is older than me, says he wants to buy a house however 4 years on they are no closer than they were before (in fact further behind).

Learn the difference between need and want... A lot of people will confuse the need with want, you don't 'need' a new shirt - I have shirts that are 10+ years old. You don't need to drink alcohol, you don't need to go to the movies, you don't need to have steak for dinner (cook bulk means), you don't need the best mobile phone (downgrade to the minimum or don't have a mobile), you don't need the best internet (same as mobile).

It might be $20 here and there but it will soon add up and the power of compounding is a magical thing.

 

Split your pay and put it in an account you cant access easily.

 

We use the % split rule

60% Survival - bills, PPOR, education and Childcare
20% Saving/Investment (currently all allocated to Interest payments of property)
20% Splurge - Gifts, holidays, takeout

Seems to work OK but currently over allocated to childcare bills or 22k per year

Cheers

 

@chylld has a good model here if I remember correctly,
As for me - I run a home budget and I focus on growing income so I eventually won't have to

 

Every individual's circumstances are different, and these circumstances evolve depending on where you are at in your investment journey.

When I reflect on my own investment journey there are a number of different strategies, but ultimately it all comes down to two very simple principles which have stayed consistent:
1) Maximize return on capital
2) Minimize expenses

I think where it is tougher than ever is the barrier to entry for property investment being you need much more capital to enter some markets than you did when I set out which can require a significant amount of savings to make up your traditional 20% deposit, particularly when the cash rate means you're earning low interest in savings accounts.

That said there are plenty of innovative techniques and paths you can take, as an example; investing in emerging / interstate / regional markets, purchasing at higher LVR% with LMI or entering less capital intensive asset classes like shares.

 

I don't understand why saving is so hard?

Take your salary.
Subtract essentials such as rent, phone, utilities, groceries
The rest is luxury spending
Eg going out. Alcohol cigarettes. Foxtel.

Work out how much you want to save.
Divide it by discretionary spending and there you go.

Obviously you can't live life without having some fun
So allocated some % to having fun. And then calculate

If you think it's too long. Change your goals or sacrifice more

 

I like to keep it simple

Salary -> Living expenses, Investments
Investments -> Luxuries, toys, cars, and more investments

At some point your investments will also pay for your living expenses; at which point your salary becomes optional and you can pursue whatever field you want to.

 

For me getting a second job helped. Picked up a part-time role a few years ago when I became serious about saving for my first place and still do it to this day even after purchasing my 2nd property this year.

I don't have a credit card or debt of any kind and I'm single so my spending is quite minimal.

 

An important aspect for me is tracking my spend after setting a budget. Without tracking my spend, I have no idea how I'm going with the exception of how my overall account balance is growing or shrinking. Whilst that is the most basic info required, I usually need to know where I'm spending more or less on then expected in order to adjust appropriately to meet my savings target. This also serves to record how much I usually spend in each category and subsequently create a more accurate budget.

I use a free app called Goodbudget <Link> for this. Feature highlights include it is free as long as you don't have too many expense categories (envelopes) and it runs on both iOS and Andriod. Expense categories is limited to 10 monthly and 10 annual, which is easy stay within as you can group expenses into logical categories e.g. utilities = gas, electricity, internet. iOS and Android was important so that both my partner and I can use the app to track all our expenses which is important aspect to track all dollars regardless of who spends it.

There could be better apps out there as I've been using GoodBudget for a good number of years. Started when it was called something else.

 

@Snowball I'm sure you could add to this discussion!

 

Thanks everone for sharing your thoughts and saving strategies. Seems like I am doing the correct thing but when I read PC users are aiming to buy 2 IPs in 2018 that makes me wonder how is it possible ( ofcourse I do not know the background, equity etc)

I don't smoke, drink once in a blue moon , cook at home, no holidays in 2.5 years, no luxury interests such as new mobile, new car or fixtel etc., always pay my CC before interest gets charged and shop at Aldi.

Stay on top of electricity deals or telco to dave some $$$$.

We decided to park our money in offset to reduce the interest of PPOR. I did think about joining societyone or latrobe as a money lender for small loans but didn't follow it through.

If the asx goes south then might buy some shares but that's a big IF.

May be I should search for people who also wants to invest in property and pool money together to buy something e.g. 10 people put $50K each and buy couple of properties. (But investment strategy rules and compliance with legal aspects need to be decided)

 

I forgot to mention Monthly mortgage payments too.

 

PC users that can buy 2 IPs in a year would be those who either already have capital in hand or have dual income/business cashflow to work with or highly paid or buying cheap IPs
if you're just near the beginning of investing and work as a minion you can't really compare. First million is the hardest

 

Ha! Thanks for the mention @pippen

No magical process really @L3ha7

I just started questioning everything we spent money on. I mean everything!

We then considered whether the expense was really worthwhile or not, based on our goals for early retirement... many things were not!

We found there is usually away to optimise every single cost in our lives, if we just stop and think about it for a minute. Luckily since we were both on around 75k incomes, we were able to save around 60%+ of our that.

I've seen many people earn much more than us and simply get nowhere. They just don't know where it goes. The numbers don't lie. It's always an expenses problem.

Even now we don't do the buckets approach or track a budget. Still simply question whether things are worthwhile based on what's truly important to us.

Living a happy healthy life only costs us around 40k, including rent. It can cost as much as you want.

Though many would argue we must be eating dog food and reusing toilet paper, it's simply that even a basic modern western life is ridiculously good when compared to history and globally. We humans have short memories!

Obviously I don't know your detailed income and expenses but it's worth really crunching the numbers to see where it goes.

Even small amounts can make big changes to your future wealth or early retirement goals