How to grow your cash stash and smash your 2020 savings goals
The doors to 2020 have opened, and with it, the opportunity to kick start the year with some healthier money habits that will also lead to a wealthier you this year.
Here are 6 super easy tactics to help you hit your savings stride for 2020:
1. Make budgeting your new BFF
Whether it’s cancelling that gym membership you haven’t touched for months or swapping out your daily $4 takeaway coffee for homemade ones, small reductions to your expenses list could total to hundreds, if not thousands, of dollars saved over the year.
With any savings goal, your budget is your best mate, as it helps you map out where your money is going and where you can reduce your spending. The golden rule: be strict with your ‘fun’ expenses (like saying ‘no’ to eating out too often), but remember to also keep it real.
One common way to divide up your monthly income is known as the ‘50/20/30’ rule:
- 50% goes into essential spending - rent, transport, groceries, bills, debt repayments
- 30% is for fun - eating out, shopping, hobbies, entertainment
- 20% goes into growing your savings
Need some help to get started? Check out our article listing the 7 Budget and Savings apps every Aussie needs.
2. Ditch the cost of convenience
While giving up on your daily $4 coffee habit is a good start, the biggest savings come from casting the net wider and reviewing your larger expenses like your energy bill, mortgage, home insurance, and car insurance.
Although it’s convenient to just stick with your current deal, switching to a better-value offer in 2020 will mean more money for you to add to your savings heap.
Take home loans as an example. Right now, the Big 4 Bank average variable rate is 3.98% p.a.^ but the lowest variable rate in Mozo’s database is 2.69% p.a. (2.71% p.a. comparison rate*)!^^ If you refinanced from the first rate to the lower rate, on a $300,000 home loan (over 25 years), you could reduce your monthly repayments by $205 and save a whopping $61,639 in total interest costs over the life of the loan.^^^
Check out our home loans comparison table to compare some of the latest refinance deals.
3. Be punctual with repayments
Did you know that forgetfulness is actually one of the most common reasons why Aussies don’t make their credit card repayments on time? So to avoid throwing your money down the drain in the form of late fees, which can be as high as $30, and hefty interest costs, a few simple actions are all that’s needed:
- Jot down your repayment dates on your calendar, and set monthly alarms on your phone (a day or two before the due date so you’ve got time to get your payment together)
- Opt for automatic payments - just make sure you’ve got enough funds in your bank account to meet your repayments, as otherwise, you could be hit with a direct debit dishonour fee
4. Don’t pay for a bad day
Yikes! Australians comfort spend an average of $1,403 a year each, with many buying things to make themselves feel better - whether that’s a new pair of shoes or a greasy comfort meal.
To kick your comfort spending habit to the curb this year, practice the art of delayed purchasing! Before succumbing to an impulse buy, walk away for a minute (or better yet an hour) and ask yourself whether it’s really an item you need. After all, there are plenty of ways to cure your stress or boredom for free, from decluttering your wardrobe to baking.
5. Start a saving spree
You read it correctly - not a shopping spree, but a saving spree! This strategy particularly suits those savers who are aiming high this year. This is where you only spend money (for a short while, say, for a month or two) on what's necessary while pumping most of your remaining income into your savings.
6. Park your funds in a high-interest savings account
Now it’s time to choose where to store your savings. Rather than keeping your cash stash in a regular bank account earning zero interest, transfer those funds into a high-interest savings account, maybe one that rewards you with bonus interest for not making any withdrawals.
Just keep in mind that since savings accounts have variable rates which go up and down with the market, it’s a good idea to always keep your eyes peeled for a better deal. If you find a better rate elsewhere, switch your money over. The good news is that most savings accounts can be opened online and don’t have fees, making switching easy and convenient.
^Big 4 average as of 2 January 2020.
^The lowest rate variable home loan in Mozo's database, as of 2 January 2020, belongs to Reduce Home Loans, with its Low Rider Home Loan.
^^^Calculations as of 2 January 2020.