This is the first of a series of articles to help you be a saver not a “week by week-er”.
Budgeting for many people is hard to do and not very exciting. Yet living from week to week financially is very stressful and can be easily avoided.
Simply put, everyone needs to live with-in their means and have a budget. It can be simple and is really just habit.
As I write this, I am working out what to pay my 16 y o daughter for washing the cars on the weekend. She knows the rules, when she gets paid- save half and spend half. The spend half she also needs permission on what she can buy. Sounds tough you say, well she is a 16yo girl with $200 in her wallet and $300 in her piggy bank ready to be banked and a share portfolio (and yes a social life).
The world of Gen Y finances is unique. People of the minute, are a generation unsuited to thinking of the long-term and are definitely unused to the idea of saving for the long-term. Or at least half are. According to a survey conducted by the American Savings Education Council, 51% of American youth are saving for a long-term goal. I would assume the number is fairly similar in Australia1.
There is no need to add yet another article to the pile of harping missives trying to frighten ‘young people these days’, talking about superannuation and recessions and financial security. Instead, let’s look at what you can do today so when tomorrow arrives (and yes, I know we’re all immortal and there is no such thing as tomorrow and we’ll never get old. Noted), when tomorrow arrives, you will be financially prepared for it.
Some basic tips:
Overestimate your spending when you budget
- MSN Money suggests this is a great place to start. Taking into account a youthful proclivity to forgetting the true cost of living, the article suggests that you set your expenses high and you will end up with cash left over, as opposed to having to use your credit card to cover the unexpected costs incurred month to month.
- In your financial journal or budget have two columns. One for expected spending, one for actual costs. You’re aiming to have the actual costs smaller than the amount you budgeted for. That way you’ve got a bit of emergency financial fat, and an amount you can add into your savings account on a regular basis.
Pay yourself first (this mean save first)
- Out of sight, out of mind. Gen Y is constantly confronted with a new distraction and thinking of the next thing, so why not use that mindset to your financial benefit? Don’t just save whatever is leftover at the end of every week, as recommended above, but also put aside some savings straight up. As soon as your income comes in, set up a direct debit into a savings account.
- Don’t do it manually as, while you might be disciplined today, it may desert you tomorrow. Do it first, and you won’t even miss the money.
Spend cash – avoid the plastic credit card.
Get your slip on
- The government has set up a number of systems to make paying tax and super relatively painless. All you have to do is go with the flow. Check that your employer is signed up to PAYG and that super is additional to your wage. Keep an eye on your payslips, and you should be set.
Some Strategies to Save Money:
Shopping around and be patient- no impulse buying.
- Always shop around for the best deal. If you give in and just pay the first price you get given for anything, you can almost be certain you have lost out on money potentially saved.
Minimising your debts
- If you have debts over your head, your ability to save extra money for investments and rainy day funds goes right out the window. Minimising your debts will allow you to save more money, and focus on creating and maintaining wealth. Of course, saving money tips that are found on this site are perfect for enabling you to put more money towards your debt by not spending as much on other items in life.
- In order to fully understand your financial commitments and standing, one must create a way of identifying problem areas and areas that could be improved upon. A personal budget is the perfect way to save money, utilising a strong understanding of tips of budgeting we have written a number of articles to explain how to best go about it. Personal finance budgeting is very important .
Start a nest egg
- People forget just how important it is to save money and ensure they have a nest egg for the future. Yes we have superannuation for this, but at the same time we need to build up some rainy day funds to allow us to have substantial cash flow when we need big ticket items, like cars or properties.
Start thinking about Superannuation
- Our last but not least topic, is Superannuation, otherwise known as Super. Everyone must realise just how important superannuation is, it is the backbone to our retirement, it is the key to a prosperous old age. Considering that at our current 9% super rate we will NOT have enough money to retire come 55 years of age, we should be making every effort to try and add our own super contributions and locate our lost super before we lose it. Here are some useful links for you regarding Superannuation:
- Locate your lost super
- Super co-contribution scheme
1 Information in this article obtained from savingsguide.com.au. Posted by: Francesca Sidoti