An easy 4-Step guide to having a savings account that your friends will be jealous of and your parents will love.
I am a self confessed spender. However, I am also a hard worker, and have been since I was just a lanky, gawky 14 year old tomboy. I have worked for the same boss for over five years, slowly working my way up the cafe ‘ladder’ - from dishy to muffin maker (which didn’t last long), to waitress to barista. I am a very subpar barista at that, but either way, I finally made it to the glorified position. You’d hope I would have after five years. However, after years and years of working a casual/part-time job, I have relatively little to show for it, other than good times, and lots of clothes. Yes, I own a car, but my parents did help me out a bit with it, however, I can proudly say I paid for over 60% of it. I did put money away a couple of years ago to pay part of the deposits for a school trip to the USA. However, other than those two major purchases/investments, most of my money has gone to fashion and fun. Which isn’t necessarily a bad thing, I am only 19 after all, so I’m not thinking about house deposits or anything of the like just yet.
If all of this is sounding relatively familiar to you, you're probably just like me - working to spend. Each fortnight or so, your pay check comes in, you pay your relative bills and what not, and put away a small amount of pay into a ‘savings’ account - that you end up withdrawing from to spend on that last breakfast out with friends before payday. Last year, I took a Personal Finance unit, which taught me a lot about saving, investing, debts, loans, tax - all of that excel spreadsheet business. Aced the unit. But I definitely didn’t ace my bank account.
Almost a year on, just last week, I had the sudden urge to whip open Microsoft Excel, and without a clue in the world what I was doing, I managed to use a monthly personal budget template to track my spending for the month of June. It seems like every second person I knew was about to jet set off to Europe, and I was absolutely baffled, in awe even, of how so many of my close friends had managed to save up thousands and thousands of dollars in just under a year to spend on the trip of a lifetime. I just couldn’t understand how they’d managed to do it, even with a relatively good income for a casual job, I was only just scraping through, pay check to pay check.
So, I meticulously went through my entire bank statement for June, creating different categories for expenses - from car insurance, to petrol, food, entertainment, Uber, clothing etc. I included everything down to the last cent, and kept a section for ‘Monthly Savings.’ When I was finished, I was completely in shock. I knew I spent a lot, but I had never tracked it visually, with charts and graphs and percentages. It was confronting to say the least, when I learnt that I had spent 89% of my monthly income. I couldn’t believe it. For someone who has the opportunity, even the luxury to be able to save, living under my parents roof and not paying many bills - and I only saved 11% of my income. Something had to drastically change. So, I implemented a savings plan. If I can do it, the girl who spent 89% of her income on mostly god knows what, you can too.
4 Step Guide:
Step 1. Make your spending visual
I have never actually used Excel, properly, in my entire life. I might be pretty good with computer stuff, but anything to do with maths or finance or computer programming really isn’t me forte. However, I discovered that Excel has plenty of budget templates all ready for you to just pop in your own numbers, without having to change a thing. So this is the most important part for you to do - trust me, your bank account might tell you how much money you do or don’t have left, but an Excel budget will crunch the numbers and you won’t be so naive about your mysterious PayPass habits any longer.
Step 2. Commit to the Budget
I get paid every fortnight on a Wednesday. So, I created an iCal event for 11.30am every single Wednesday to review my spending. By this, I mean adding in any expenses to the budget, and adjusting accordingly. By doing this even in the ‘off’ weeks - the in-between weeks where I don’t get paid, it holds me accountable to my spending, giving me a real-time percentage and summary. Each month, create a new budget to track that months income, spending and saving. It is handy to create a ‘Budget’ folder on your desktop so that you are constantly reminded of it.
Step 3. Open a High-interest, Long-term, Savings Account
I already had a savings account. It was an easy-access, online account that had unlimited withdrawals and no minimum monthly deposit required. So it was super easy for me to take money out that I had already put in. What a waste of time. For someone like me, who has spent years being very undisciplined with their savings, I needed something with a few more restrictions, with limited access, and a higher interest rate to encourage me to save more. So, I went online, and compared almost every single bank in Australia’s savings accounts. I ended up choosing one from the bank I was already with, so it took me under ten minutes to apply for the account online. It had one of the highest interest rates, wasn’t easily accessible, and required a minimum of a $200 monthly deposit. This account was absolutely perfect - it forces me to save at LEAST 200 big ones a month. I need this kind of authority in my life, and I couldn’t have been happier with my choice.
Step 4. Set Goals and Calculate your Potential
I know that I want to have a good chunk of dosh ready to go when I complete my final semester at the end of 2018. For travel, for housing, for anything really, whatever life throws at me. I just know that I not only want it, but I need it there, so that I am not stressed about having to get a job the minute I leave university. With that in mind, and with my new savings account open, I calculated the minimum amount of money I will have saved by then, by putting away at least $200 a month. I then added my estimated tax returns to this (which you should definitely be saving if you have the opportunity to). I then adjusted this calculation to reach my goal of $10,000 by the end of 2018. So, I now know that I need to be saving around $400 a month, which is $200 per pay check. A quarter of my monthly pay. That is absolutely nothing in retrospect - but it will lead to something big. By calculating your potential savings and setting a goal, you will feel far more inspired to save - even if you are saving for no reason in particular, wouldn’t it be great to be able to fly to Europe at the drop of a hat if you needed to?
I hope these four very simple tips will help you guys get to your savings goals, and inspire you to really try and spend less. If I can do it, a girl living from pay check to pay check due to her addiction to shopping, you can too. After all, I am embarrassed that I don’t have any savings, I should be using the position I am in as a great savings opportunity, not milking it. Saving is often over simplified, or made far too complex. You don’t need to only be spending cash. You don’t need to skip out on socialising, or on purchasing a new pair of sneakers, or a getaway. You just need to plan your spending, and likewise, plan your savings. A quote from my current favourite book #GIRLBOSS; “Money looks better in the bank than on your feet.”