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Have you ever stopped to check your balance in your savings account? Do you like what you see?
Oftentimes, people overlook their savings in favour of buying things in the present – whether it’s earmarked for monthly bills or luxurious goods. Some of these payments are obligations – but for the rest, you may be fortifying bad spending habits unintentionally.
If you don’t want to drain your money, here are some tips for building up your savings account fast.
Pay off some debt
Debt is one of the primary sources of financial insecurity. It’s also the first thing you have to focus on before padding up the rest of your financial net. If left unchecked, debt can leave you short of hundreds to up to thousands of dollars due to interests depending on the loan.
Start by reducing the number of bills you have to pay. If you owe a friend or a relative a bit of cash, try to pay that off first. Keep your loans few and far between. Next, focus on paying debts with higher interest charges. By prioritising a debt-free lifestyle, you build your savings account by restricting the outflow of your net worth.
And to top it off, paying off debts first can improve your credit score too, strengthening your look in financial institutions in the process.
Log down your expenses
That iced latte from down the street you buy every morning before work? That expense accumulates. If you spend AUS$ 5.00 on a beverage every morning, you can be looking at thousands of dollars spent by the end of the year.
Take control over your expenses by keeping track of all your expenses – down to the minute, seemingly insignificant details. Once you build up the habit of logging it down, consider categorising your expenses. Categorise it by food, entertainment, necessity, or whatever fits your needs.
Once you do this, you’ll get a clear picture of where your expenditures go. This will make the process of cutting down unnecessary costs simpler for you. If you’re looking for a specific tool to help you visualise your finances, you can calculate your savings here.
Cut down your spendings
Let’s face it: no one likes the idea of living paycheck to paycheck. The monthly grind to reach the bare minimum of obligatory bill payments, only to do it all over again, promotes immense stress and dissatisfaction.
By cutting down on what you spend, you sacrifice a little bit of your present happiness in favour of your future self. Practicing delayed gratification leads you to the goal that you think is impossible – such as buying that new automobile or having enough investments to found a cool, new startup. It’ll demand a lot of discomfort in the early stages, don’t get me wrong. But the funds that could’ve gone to that discounted dress could’ve given you a better ROI if allocated to some other investment instead. Cost-cutting works.
Set achievable goals
At its core, you use money to buy things, and you’d need to spend them at some point. One of the best ways to trick your mind into saving money is by setting up savings goals. Ideally, these goals are things that make your life fulfilling rather than one-off trends that’ll depreciate over time.
Here are some short-term goals that you can draw inspiration from:
- Car down payment
- Trip around the world
- Emergency Funds (3-6x months)
Here are some long-term goals:
- Your child’s education
- Your retirement funds
- A new family house
Needless to say, your goals are specific to you and your needs. Give yourself some time to figure out what’s important to you, and use your savings to make that dream a reality. Goal progression is a big contributor to one’s happiness – so keep that in mind as you go through your daily grind.
Consider a term deposit
What are term deposits? They are a type of deposit account that offers higher interest rates than savings accounts. But once deposited, you’re locking away your funds in that account for a set amount of time to accumulate that interest.
If you already have a decent amount of cash under your jurisdiction, consider placing them lump-sum in a term deposit. Term deposits offer similar benefits and interest rates as savings accounts, at least in the short term. But if you’re looking to expand your money and not continuously withdraw it, put down your funds in a term deposit.
If you’re looking for a high-risk alternative, you can consider investing a portion of your funds in shares of stock. However, if you don’t have a decent amount of savings in the first place, follow this format instead:
First, pay off loans, then build up your emergency fund and savings, then security and insurance, and finally, investments.
About the author
Rebecca is the Content Manager at Extras, a freelance writer, and an avid reader of self help books with a focus on finance. A big believer in taking action, she wastes no time tackling obstacles that lie ahead. When it comes to her endeavors in business and entrepreneurship, she’d rather be stuck with oh well than what if.