Spend smarter to reach your goals sooner
If you’re looking at doing more with your money and buying a big ticket item such as a car, boat or home, it’s time to look at your spending habits and make a plan to get ahead. Here’s how to start:
- Know where your money goes - The first step is to identify where your money is really going. It’s easy to remember how much your mobile costs or how much rent you pay, but do you know how much you’re spending on everything else? And, can you afford to? It’s a good idea to record what you’re spending. You can do this yourself using a spreadsheet. This will show you where the opportunities are and where you may be spending money that can be better spent on helping you reach a goal.
- Make a plan you can live by - Once you know your position you can then create a plan to get that big ticket item that you want. Creating a spending plan can help you work out how much of your income you can put towards saving for your goals, without impacting the life you want to live. In your plan, you can list your expenses and set limits on how much you want to spend on expenses each week. Or it may simply be a commitment to change your behaviours to reduce spending, such as cooking at home more or using your car less.
- Build your savings skills - Spending less than what you earn is a smart way to get ahead. Set yourself up for success by starting with simple savings goals, so you can keep a balanced lifestyle and enjoy putting money away.
What are your goals?
These are things you want to achieve within several months up to the next couple of years, like buying a new TV, going on a holiday, buying a car or even paying off your credit card debt.
These are plans you want to turn into reality within five years or so. Thinking about buying a home or investment property? That’s generally a long-term goal. Talk to a financial Adviser about investing your money wisely. A good investment strategy will go a long way towards helping you achieve your long-term goals.
Saving for a rainy day
You’ve probably heard this phrase many times before but it really does make sense to get used to this habit. It’s a good idea to keep some money away for an emergency, maybe enough to last you a few months.
Saving to reach your goals
Many of us start saving for something without a set figure in mind. But until you know all the costs involved, it’s hard to put a realistic plan in place to help you achieve it. Here are some ways to get started:
- Make a list of all the costs - It’s not just a car you’re saving for - it’s registration, insurance, petrol and accessories. It’s a good idea to do your research to understand all the elements.
- Shop around - With an idea of the costs involved, you can shop around to see where you can get the best price.
- Make a plan to reach your savings goal - Once you understand the price range, you can set your savings goal and start planning timeframes.
Understand the true cost of borrowing
You may be thinking about getting a loan to pay for a big-ticket item. The benefit of a loan is that you’ll have the item sooner, but there are two areas of caution to consider before taking steps to borrow money.
- You’ll almost always end up paying more for the item - Most of the time loans have application fees and interest rates attached to them. So although you may get the item sooner, you’re choosing to pay more for the item.
- When you take on debt, you’re taking on risk - Your monthly repayments may be manageable at the time you get the loan but keep in mind that if your situation changes, you may not be able to keep up with repayments. If this happens, you may face penalties and other extra costs. This remains a risk until the loan is completely paid off.
The decision to borrow money shouldn’t be an impulse decision. Make sure you’re aware of all the terms and conditions of the loan and shop around for the best deal and plan your budget to work out how long it would take to pay it off.