How to manage your money with a savings plan
Develop a realistic savings plan to achieve your financial goals.
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You don't need have a high income to achieve your financial goals – with a savings plan it's possible to go on that holiday you've always dreamed of without getting into debt. It may take a few months – even years – but with our guide you won't need to spend a dollar on your credit card when you travel. You can also skip ahead to start comparing savings accounts right away. You could also speak to a financial planner if you're investing a large sum of money.
The steps to making a savings plan
Step 1: Work out how much money you need to save
Whether it's a round trip around Europe or a Contiki tour across the United States, your holiday will cost a significant amount of money. It's much better to save as much as you can before you leave so you don't rely on debt to fund your trip. Here are some ballpark figures to get you thinking:
- Round trip across Europe: From $5,000 to $10,000 including flights and accommodation.
- Contiki tour across the States: From $399 (two nights in LA) up to $12,539 for a full trip.
The same principles apply no matter what you're saving for.
Step 2: Decide how long you plan to take to save this amount
Once you've arrived at a lump sum, you can reverse engineer how long it will take to save that amount depending on your increments. For example, if you plan to save $10,000 and take a holiday within the next 2 years, then you should save about $416 per month. This amount could be a bit less, thanks to compound interest. There are also many great apps available to help you do the maths.
Step 3: Identify the type of savings account that suits your needs
To get the maximum variable rate (MVR) you need to set up the right account. There are basically two types of savings accounts which are described below:
|Type||Introductory Bonus Savings Accounts||Bonus Saver Accounts|
Based on the framework above, if you're putting away a certain amount of money each month, you may find that you benefit most from a Bonus Saver account. However, if this is your first time saving up for a large lump sum, then an introductory bonus savings account can help you get into the habit. You can always switch to a bonus saver account when the introductory period is up.
Organise with your payroll officer to have a portion of your salary deposited directly into your savings account every month. You'll never see the money, so you won't miss it – plus, you'll be able to meet the conditions of your bonus saver on a regular basis, so you're always earning the maximum variable rate. Paying a portion of your regular income into your savings account every week, fortnight or month is a great way to help you save money without even having to try.
Step 5: Examine areas of your life where you may be able to reduce your spending and create a budget
Setting up a budget involves reviewing your income, expenses and assets to try and improve your financial position, such as paying off your credit card or personal loan. You'll be able to sort out your money priorities and find the right balance between spending and saving. Read how to create a budget.
This is the part where most people give up, because they find that cutting down their costs affect their way of life. However, if you seek the support from your friends and family, you may find that it's a lot easier when they're involved. Here are our top tips:
- Sell or get rid of the things you don't use. Examine your living space and gather all the things you haven't touched in a year. If you can sell them, that's great. But throw away the things you can't – this declutters your home and sets up a mental state of mind of the things you actually need.
- Do some basic energy efficiency installation around your home. This includes changing light bulbs, updating your heating and cooling systems (if you have one) and switch energy suppliers to save money on your energy bill.
- Consider going on a contract. Based on prior research conducted by finder.com.au, going on certain plans with the new iPhone 6s works out cheaper than buying it outright. If you're about to buy your next phone, do your research and see if it's cheaper on a plan. While you do get locked in, you could save in the long term.
Step 6: Check your progress regularly
This is to ensure that you are on track to reach your goal and identify any pitfalls or traps early so they don't get in the way.Back to top
Working out a budget is quite simple if you follow these basic steps:
- Calculate your income. From wages and investments to rental income and child support, work out how much money you earn each week.
- Calculate your expenses. Work out how much money you spend each week and on what - groceries, petrol, electricity, entertainment and more. Be as detailed as you can to ensure that you don’t miss anything; keeping a running total of every expense for a couple of weeks might be a good idea.
- Assess your expenses. Which of your regular expenses are essential and which are not? Are there any costs that you can reduce or even eliminate altogether? You might want to cancel your Netflix and cut back on big Friday nights at the pub, while setting yourself a weekly grocery spending limit can also help.
- Create a budget. Work out how much of your income you can reasonably afford to spend each week and still be able to put aside money into a savings account. Allocate your income to certain categories to help manage your spending, for example $100 on groceries, $75 on entertainment and $30 on public transport.
- Review regularly. Monitor your weekly spending regularly to see if you are sticking to your budget, and make sure to adjust it whenever your financial situation changes.
How can I set up an Automatic Savings Plan (ASP) with my bank?
Creating an automatic savings plan with your bank is easy. As well, ,any banks, credit unions and building societies offer online tools and resources to help you work out a budget and calculate how much money you need to save each week to help you reach your savings goal.
Here are some financial institutions that offer ASPs:
- CommBank - Log into Netbank and go to 'Transfers & BPAY', fill out your transfer details and add a description about what you're saving for, i.e. 'Holiday across Europe'. Under 'When', select 'Set up regular payments' and indicate how often you'd like to transfer. Follow the prompts to finish.
- ING - You can choose between an ASP or Salary and Direct Crediting. Log into your account via online banking and go to 'Move My Money' – you'll then need to choose the regular amount you plan to save and how often.
- Suncorp Bank - Log into Internet Banking and click on 'Transfer Money'. Select the accounts that you want to transfer between and give your ASP a name. Select 'Recurring Transfer' and indicate how often you'd like these transfer to happen.
- NAB - Log into NAB internet banking, roll your mouse over 'funds transfer' on the main menu and follow the prompts. You can select a periodic transfer, then choose your preferred frequency (whether it's weekly or fortnightly).
- UBank - Log into your UBank account online, hover your mouse over 'Managing' and then click 'Savings Plan'. Under 'New' choose 'Automatic Savings Plan', then 'Add'. Fill in the details and indicate how often you'd like the transfer to happen.
HOW TO SETUP AN ASP USING UBANK
Once you've logged into your account and have chosen to set up an ASP, your screen should look like the below. You'll need to indicate which account you wish to transfer from and to, at what amount and how often.
Your bank can also help you manage your accounts more effectively to build your savings balance quicker. For example, you might have a credit card for emergencies only, an everyday transaction account and a savings account to park surplus funds.
Once you have a savings account set up, banks also make it simple to deposit money into the account by setting up a direct debit.Back to top
How do I stick to a savings plan?
Many of us start out with plenty of ambition and the best of intentions, but within a couple of weeks our carefully crafted savings plan has fallen by the wayside. However, there are a few key things you can do to ensure that you stick to your savings plan.
If you’re thinking of developing a savings plan, you’ll also need to set a spending budget for yourself - the two go hand in hand if you want to boost your savings balance. Even working out a rough idea of how much you can afford to spend each week will go a long way towards helping you save, and there are plenty of useful apps and online tools to help you do it.
Next, tell your family and friends about your savings goals. You’re far less likely to just give up on your dreams if you’ve shared them with someone else, and your loved ones will be able to offer plenty of extra motivation if your commitment to the plan starts to waver.
Reviewing your progress regularly is also an essential step. This allows you to check if your plan is working and if you’re well on the way to your goal, or whether or not you’ll need to make adjustments to make the plan more effective. Even just looking at the bank balance you’ve built over the past weeks and months can provide a huge confidence boost.
Finally, never forget what you’re saving for. That dream home was the reason you developed a savings plan in the first place, so never lose sight of what you set out to achieve.
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