Developing (and Maintaining) Good Saving Habits

Saving money isn’t just about crunching numbers, it’s a transformative habit that can change your financial life. But good habits take time.

 

Research shows it takes an average of 66 days to form a habit, with a range between 18 and 254 days.

 

Most of us have good intentions to save money for something specific or for a rainy day, but sticking to those savings habits over the long-term takes determination, planning, realistic adjustments, and a good understanding of where you’re at financially.

 

In this guide, we’ll explore the details of designing a sustainable savings strategy. 

 

Building a sustainable strategy for saving money

It’s one thing to develop a savings plan, but fostering good savings habits takes time, focus and dedication. Your strategy needs to be realistic and tailored to your unique personal circumstances.

 

Start by evaluating your financial goals and what you want to save for. It may be building an emergency fund, saving for a major purchase, paying off credit card debt, or planning for retirement.

 

Big goals are great, but small ones are more achievable. It's not always about trying to save more money quickly. A sustainable strategy might mean setting aside smaller amounts on a regular basis over a longer period of time, rather than trying to save 80 percent of your income and feeling disheartened if you can’t stick to it.

 

Avoid setting unrealistic savings targets that might lead to frustration or abandonment of your savings plan. Remember, consistency is key.

 

Adjusting your existing savings plan

Having something you’re saving for in mind is one thing, the next is to have a clear plan in place. A successful savings plan should break down exactly how much you need to save in what timeframe. It’s also going to need tweaking if your circumstances change.

 

This might include income adjustments due to a raise, a job loss, or a side hustle, or expense reassessment (looking at areas where you can cut back spending). It’s also important to assess your savings habits as well as your short-term and long-term goals to make sure they’re still relevant.

 

Understanding your discretionary spending

Managing your discretionary income is crucial for effective saving. Disposable income is your net income – it’s what remains after the deduction of taxes. Discretionary income is the amount of net income after all your necessary living expenses are covered.

 

Evaluate this discretionary income, as it’s where a large portion of your savings will come from, to identify your spending habits and areas where you can cut back without compromising your quality of life. Small changes to your discretionary spending can reap big rewards.

 

Don't forget annual expenses

One common oversight in budgeting is forgetting about annual expenses. Insurance premiums, car registration costs, or housing costs such as council rates or strata payments can catch you off guard if they’re not accounted for.

 

Create a separate category in your budget for these annual expenses and divide the estimated cost by 12. By setting aside a portion each month, you'll be prepared when these expenses arise, preventing unexpected financial strain.

 

Organise your bank accounts

Organising your bank accounts is a practical step towards reaching your savings goal.

 

Consider setting up a separate savings account dedicated to realising your specific financial plans. Having separate accounts for different objectives – an emergency fund, travel fund, or major purchases – can provide clarity and make you think twice before using your money for other purposes.

 

A Westpac Life savings account allows you to set up six different goals in just one account. You can set up automated transfers from your everyday transaction account to automatically split your savings across your goals.

 

Take advantage of a savings account with added interest, such as Westpac’s eSaver account. It offers bonus introductory interest rates, with no account-keeping fee, monthly fee, or minimum deposit requirements. 

 

For longer-term savings goals, consider a term deposit with a fixed interest rate over a set period of time. It means you can’t access your money until the term is up, but you’ll get a guaranteed rate of interest, so you’ll know exactly what the return on your money will be.

 

 

Tools to help you save money

Developing good savings habits doesn’t need to be a time-consuming slog. There’s a range of calculators, planners and products to help you reach your short-term or long-term goals.

 

If you bank with Westpac, the mobile app has a range of handy tools. You can compare your spending across categories, so that you have good visibility on your essential and luxury spending. You can categorise and tag transactions, so you can see exactly where your money is (or isn’t) going. Tracking income and expenses each month can also help you plan ahead and see which categories have the highest spend.

 

Westpac’s budget planner is a free and easy-to-use online calculator that can help you look at your incomings and outgoings, and determine if you’re spending more or less than you can afford. 

 

 

What to do with a windfall?

Whether unexpected bonuses, tax refunds, or inheritances, a windfall can provide a significant boost to your savings. While it’s tempting to splurge, consider allocating a portion or even all of the windfall to your savings goals. This could speed up the progress and bring you closer to achieving your objectives.

 

In any case, strike a balance between rewarding yourself and reinforcing your commitment to building a secure financial future!