Aussie households need to save more
Six steps to saving more
Research that received a fair amount of media attention recently paints a pretty bleak picture for many Australians. The research, by ME Bank suggests that Australian households are in more financial duress than ever before.
One quarter of Aussie households have less than $1,000 in savings
The key finding of the “Financial Comfort” report, which surveyed 1,500 people about how they perceived their own financial wellbeing, is that Australians are not confident that they have enough savings. This finding is consistent with official figures from the Bureau of Statistics (ABS) which show that in the March quarter, the household savings ratio fell to 2.1 per cent — its lowest rate since December 2007.
According to ME Bank, around a quarter of Australian households have less than $1,000 in cash savings.
This kind of financial stress is difficult to bounce back from, but it’s not impossible. With the right advice, and a good plan, it is possible to get out of the cycle of financial stress and back on track, no matter your lifestyle or your earning power. It’s all about wise money management.
1. Work out what you earn and what you spend
The single most important personal financial tool is budgeting because it highlights what you’re earning and what you’re spending. While this can be a confronting exercise for many people, the positive upside of budgeting is that it also highlights patterns of habitual (and sometimes unnecessary) spending. Once you have this information it’s possible to see clearly identifiable ways you can save.
2. Review your spending
There is a sound bank of economic data to prove that life is becoming more expensive. The cost of living is increasing across the spectrum and particularly for our basic needs like housing, electricity, petrol, and food. Conversely wage growth is stagnating across many industries. Make sure you understand your real costs.
3. Open a separate savings account
Open an account that is completely independent of all your other accounts so you can’t access it easily. Then commit to putting a small amount of money into this account each pay day. Direct debit is great – you won’t even miss the money, and once you begin to see the funds grow, you’ll be motivated to add more.
4. Cut up your credit cards and review ALL your debt.
By and large, many of us who are now grownups managing our own lives were not taught good financial principles at school. And, as the cash-based economy dies, and is replaced by eftpos cards and credit cards and debit cards, we’ve got less control over what we spend – we swipe, most of the time with little concern for the amount we’re actually spending.
Back in the days when we had cash, once it was gone, there was nothing more to spend! But most people have overdraft facilities and credit cards and it’s easy to just keep going until the next pay day. Added to this, the banking environment has become more sophisticated. There’s a whole litany of jargon around bank accounts and lending that many people don’t understand. Fees and charges too.
What’s more – those retailer-driven ‘sales’ and ‘rent-to-own’ and ‘buy-now-pay-later’ schemes make spending incredibly tempting. But they’re expensive money traps, especially if your financial position is tenuous. Reducing debt is paramount when you’re strapped for cash. Talk to a financial planner about the various ways you can do this.
5. Check your superannuation.
A ‘Rainy Day’ or savings account is one thing – because a buffer between you and those times when life throws an unexpected expense at you will make all the difference to your financial position, and also your personal stress levels. But you also need to be considering the longer-term position and this includes your superannuation. There are a few ways that you can contribute to your super and get a tax benefit which can ultimately benefit your cash reserves. Getting professional advice for your personal situation is recommended.
6. Review your insurances.
Feel like you can’t pay another bill? Well, can you afford not to? While insurance is something we hope we’ll never need, it’s important to have adequate cover when we do. And in many cases, insurance premiums are more reasonable than people think. Insurance can be obtained to cover a range of life’s mishaps including loss of income, trauma, and more serious total and permanent disability. A financial planner can help you understand the benefits and make sure that you’re protected.
This is general advice and should not be treated as personal advice. MoneyLink Financial Planning Pty Ltd is an Australian Financial Services Licence Holder. No:.247360
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