Avoid the barriers to saving

Doesn’t matter what time of year it is, it’s always difficult to save. The hardest part is actually finding the money to put aside once bills, loans and everyday general expenses have been taken care of. What we must do is identify the main barriers to saving and take steps to avoid them.

Here at the credit union we have thought of a few ways to help you save.

Avoid mortgage stress

In a general household, housing costs account for a great portion of monthly income. Mortgage stress not only diminishes your level of savings, it can provide uncertainty when it comes to making regular repayments.

If your mortgage repayments equate to more than a third of your total income, you may wish to consider downsizing to a smaller house or apartment in order to effectively manage your mortgage costs.

Consolidate your debt

Whether it is a university debt, a mortgage debt, car loan or credit card balance; a large portion of us will have to deal with debt at some point in our lives. We offer a wide variety of services to help you consolidate your debt into one easy repayment. Our personal loan will assist you to manage repayments; while our financial planner will provide you with important financial advice.

Prepare for unexpected events

You never know what's around the corner. If an unexpected event occurs such as a car accident, unemployment or high medical bills, it is important to know that you have savings to tide you over should the worst occur.

In addition to insurance, regular deposits are the key! Open one of our high interest savings accounts and establish a regular direct debit amount that you can afford. You should aim for 10% of your income as a minimum, however even smaller amounts add up! It is an effective way to put funds aside and helps elimiate some of the stress associated with these events.

Know where your money goes

Often our capacity to save is limited not only by our income but by the fact that we’ve made no firm plans to save. As we get older our income increases but if we’re not in control of our finances and don’t have a savings plan, our spending increases in line with our income and we end up with nothing to show for our hard work. Saving gets you where you want to go, and helps you reach your goals, whatever they may be.

In order to save effectively you need to understand where all your money is coming from and where it is going. Try keeping a spending diary for one pay period, then take a good look. Can you increase your income or cut your spending to increase the amount you set aside for savings?

Set financial goals

Any successful savings plan needs to have a series of goals, not only to give you an idea of how much to save each pay, but also to help you stay focused on the end result. When setting your goals make sure they’re real. If they’re out of control or too wild you’ll find that you won't stick to your savings plan, because you know you'll never get there.

Make sure your goals are ‘SMART’

• Specific – What are you going to do, why you are going to do it and how?
• Measurable – If you can’t measure it, you can’t manage it.
• Achievable – If you set goals which are too far out of reach, you probably won't really commit to them.
• Realistic - Devise a plan or a way of getting there which makes the goal achievable. The goal needs to be realistic for you and where you are at the moment.
• Timed - Set a timeframe for the goal: for next week, in three months, in one year. Putting an end point on your goal gives you a clear target to work towards.

Separate needs from wants

Needs are the things you must have to live, like food, clothing, and shelter. Wants on the other hand are luxury items - you can live without them, but having them will improve the quality and enjoyment of your life (designer label clothes, eating out, music, CDs, DVDs, new car etc). Try creating your own personal checklist. Divide your list into columns – in column one list things you really need and in column two list all your wants. Once you’ve crossed off all of your needs, then you can start saving for your wants.

Create a realistic budget

Once you’ve understood where your money’s coming from and where it’s going, have established some ‘smart’ financial goals and distinguished your needs from your wants, you’ll be well on the way to creating a realistic budget.

A budget is a detailed plan of all the income you expect to receive and all the money you intend to spend over a certain period of time. A good idea is to make your budget coincide with your pay. For example, if you get paid weekly, make your budget weekly too.

Revisit your budget every three months to see if there are any changes, e.g. pay increases you can transfer to your savings or spending you can tighten up on.

Deposit your savings

It pays to have your regular savings deposited into a savings account and not under your mattress.

As the balance in your savings account grows, you should consider moving your money to one of our fixed term deposit accounts. Fixed term deposit accounts pay higher interest and stops you from getting at your money too easily.

Motivation & Determination

• Once you get your head around the idea of saving, it's not as hard as it sounds. All you need is the motivation to start and the determination to stick with it.
• Think years, not weeks or months. Keep focused on the things you’ll be able to afford if you save.
• Prepare a budget and review it regularly.
• Put a fixed percentage of your pay (think 10% as a minimum) away each pay.
• Put your money out of reach, somewhere you can't get your hands on it easily.