Saving strategies

This site really helpful

 

Thanks for the tips!!

 

Budgets are more a planning tool than anything else. They are great to take some early decisions (like how much should I salary sacrifice into my Super this year to optimize my taxes...) but they won't help you save more.

Savings come from habits.

You need to know where you money is going first. For this a P&L is the perfect tool (or even better: cashflow starement). The trick is that it is pretty hard to build unless you track all your expenses... Some banks could help (like CBA with their phone app) where you can categorize your spending. It is very worthwhile doing the exercise though!
From there the 80/20 rule applies... just work on your highest expenses.
Of course you can easily get a better deal on your utilities, but in the end of the day you'll manage to save a couple of hundred dollars a year.
Take your highest expenses and think hard about them (mortgage, childcare, food, holidays, car loan, etc...) and see how you can reduce those. Some will be hard (childcare for instance). This is the cost of living. Some will be easy (smash avocados).
If you don't have enough data (like food, is it groceries, restaurants, alcohol?) then drill further.
If there are some stuff you don't want to reduce then it is a conscious choice. Up to you to work out your priorities.

 

We have used a similar process from the barefoot investor. Have several different offset accounts and our income is split between them on payday. 60% stays in bills, 20% goes to investing, 10% holidays and leisure and 10% spending (5% each). We each have a card for our own spending acc and another for bills acc (groceries, petrol, medical ect. .) While Scott's investing strategy is way too conservative for us I think his book is a must read for anyone starting out on thier investing journey. We also reconcile our bills account using waveapps.com to help us see where our money goes.

 

1. If you've already decided you absolutely need to purchase something, consider buying second hand. Lots of excellent condition items on eBay and Gumtree for half the new product price.

2. Pay everything on a credit card with rewards for points but make sure you pay off the card every month

3. For recurring expenses, phone plan, energy, internet etc. make sure you're on the best deal by using comparison websites. Same with mortgages.

4. Methodically go through your house and sell anything you no longer need it haven't used in a couple of years. You'd be amazed at how much money you can get back

5. When buying online, use cashback websites such as cashrewards.com.au

6. Buy the entertainment book so you can get gift cards at 5% off. Great for stuff like groceries where you can spend hundreds each week. Or shop at ALDI for some/most of your groceries

 

5% to savings
10% for investment,
35% yours to spend
50% for bills

All as a percentage of after-tax income

 

This!

The easiest way to reign in your spending is to give yourself a set amount each week in CASH. Just like way back when your parents went to work, when you got paid in cash & had to put the rest away for bills & savings etc.

Pay cash for your petrol, groceries, entertaining etc. If there's no money left in your wallet, you can't spend anything else. Putting things on a card doesn't give you a sense of how much money you've gone through in a week. It is all too easy to buy lots of small things without even realising that you are burning through the money if you are swiping it all onto a card. If you start the week with $500 & spend, say, $200 on groceries & another $100 on transport, it is easy to see that you have only another $200 available to you. You can question whether you want a fancy diner, or buy your lunch each day at work, or go to the movies.

 

It is hard to stick to a budget

So each week "most" of my earnings go to loan commitments

Most of it being extra payments off my PPOR

The balance is mine to spend, and each time I see the balance remaining I know I need to be selective with my spending

So many either swipe with no regard, or see the balance and think "I've still got heaps"

Auto transfer of a % on pay day into an account without a plastic card is how I started saving, and saving became a habit

 

Easiest way for consistent savings is to have powerful and compelling enough reasons WHY you're saving with clear saving goals in mind or even better, written down. Without that, you'll always find excuses to blow money .


Many ppl don't have a compelling enough WHY, so they spend most of their salary away and then some.

 

while savings are important, the more important thing is to think about how to earn more.

the human mind has a limited resources / time... if you focus too much on budget, savings, deals, discounts, etc., spend too much time for shopping visiting 5-8 shopping centers/shops because the best prices for goods are not in one place, your mind won't have an opportunity to think about finding more sources of income.

you can spend 30% of your free time to optimise the spends by 20-30%, however it's also possible to spend that time on self-education and building some business which can increase your earnings by 100-1000% in the future

the key is to keep the balance between actions for savings and actions for earnings.

 

If you don't get the mindset right, no matter how much you earn, you will just spend more. I know people earning half of other people's incomes and save more than them.

It all comes back to mindset/discipline on this I'm afraid.

 

Technically savings are just net of earnings and spend. Yes, you can reduce spending to maximise the savings, but you're constrained on how much you can reduce, and often it can be done only by permanently spending more time and reducing quality of life. At the same time, focusing on earnings is not constrained, you can increase it to the point when it's irrelevant how much you spend.

When you focus on earnings, you get rational spending habits as an additional benefit because controlled spends is the key to profitable business. If you focus only on spends then that doesn't help you to earn more, so such people are still poor compared to the rich.

I knew many people who made too much efforts to save more. Yes, they saved more, but it didn't make them happy, and many of them finally lost the money within a short period because of wrong investment decisions. They knew how to save money from spending it, but they didn't know how to save what they saved.

I'll say it again - both strategies are important, and first one is easier, but with 2nd you increase both savings and earnings at the same time and it gives you true financial freedom

 

You do know that's nonsensical right.

Yeah their mindset magically transforms to better saving habits once people earn more. Mm hmm.

 

Not "once people earn more" but "when they develop business/earning skills, they automatically develop skills/habits for rational and controlled spends". It is often difficult to understand for people who is experienced only in RE related business when a one needs first to save (as the first step) in order to have a deposit for the first project

For many other types of business activities you don't need to save at start and to have initial capital / funds. You get that skill automatically

 

I have a splurge account set up with a separate card. Basically 10% of my pay goes in there (I get paid monthly so it seems like a reasonable amount). This is what I use for stuff I don’t need, but want- like Netflix, foxtel, eating out etc. When it runs out, I know I need to stop. But some months I have left over, which I leave in there.
Everything else is essential (yes, that includes the phone, gym, internet mortgage repayments, bills etc), so I have an account set up for that.

For IPs, I have separate offset accounts for each. My rental payments will go in there + extra to cover insurance etc. I work out what these will be at the beginning of the year and divide it up monthly. So every month, I know how much extra I need to put in.

No spreadsheets, no need to track everything. You will be able to quickly tell what your surplus is by how much you build up in your everyday account (essential items). Hope that helps.

And I don’t have a credit card

 

Using an IOS app - Pocketbook - link all your accounts to it, you can see a summary of the different 'types' of spending. Then as others suggested, just cutting costs where you can.

For the forecasted budget, used this little spreadsheet - differentiates between needs vs wants etc
Lifestyle Calculator | Life Skills That Matter

 

Work out your fixed costs then everything else is discretionary



Use A Spending Plan Instead Of A Budget To Give Yourself More Flexibility

 

It appears the OP has a Spending discipline issue. Very common, and once entrenched, a difficult habit to escape from.
Adoption of a Needs mindset over a Wants mindset needs to come into play, quickly.

 

Pretty good, though I'd want to be saving / investing at least 20% of post tax income.

That will still mean you'll be at work for at least 27 years.

Remember, you may get married / have kids / buy PPOR, this will destroy your savings rate. Most forget to account for this.



Although I'm significantly less thrifty than 5 years ago, I always think:

1. Is me buying this, worth me staying at work for another week/month/year?

2. For every $1 I spend, that is $9 I can't borrow from the bank (simplistic 90% LVR).

That $4 weekday coffee = $200 leveraged, or $10k+ / year.
The $10k holiday = $100k less for my next investment property.
And then you factor in property doubling in 10 years, that's $100k in 10 years, $300k in 20 years.

You want to wake up looking at your water-views from your bedroom window in your future, or two weeks in Greece today?

@Sydney_gal16 I would recommend you read 'The Barefoot Investor' by Scott Pape. Has a great simple breakdown for how to funnel cash.

That stated. Without discipline, nothing works.
Sound contradictory, however TRUE freedom, comes from discipline.