How to trim your spending and bulk up your savings in 2021

When it comes to money management, the decade got off to a very weird start. A global pandemic and short-lived recession left many Australians struggling to maintain funds in their savings accounts, while others started spending in new ways.

According to research by UBank, Aussies started to focus more on saving for retirement or future rainy days as 2020 rounded out. 

However, the Australian Bureau of Statistics (ABS) noted significant jumps in retail spending in the last quarter of the year. 

Spending on items such as clothing, footwear, recreational goods and cosmetics rose beyond their 2019 levels. As families in lockdown might imagine, household spending (on things like furniture, gardening supplies, electronics and hardware) also saw steady growth, with the final quarter sitting 22% higher than the previous November.

While a splurge over the holidays might have been a necessary 2020 remedy, we should get prepared to retighten our belts in the face of continued economic uncertainty caused by the flow-on effects of COVID-19. 

So, here are a few steps to help you on your new year mission.

Slash spending

Get the best deal on the basics

Take a little extra time to find the best value option on all purchases, be it insurance, groceries or a house to call home. There’s heaps of dough to be saved on necessities, you just need the patience to compare offers and prices, then negotiate the best deal.

For example, Mozo research shows drivers can on average save $902 a year on comparable car insurance policies just by hunting around for a better price. Similarly, you could cut hundreds of dollars off your electricity bill if you compare and switch providers, according to Mozo’s energy report.

Stick to secondhand when possible

Learn to love the pre-loved and you’ll move into major spending reduction territory. Whether you head to secondhand stores for clothes, find furniture steals online or seek out market stalls and garage sales for everything in between, shopping in the secondhand economy is great for your wallet and the environment.

Make budget cuts

Start by properly laying out a budget, then strip it back to the bare bones. If you don’t want to go cold turkey on your discretionary spending, decide which non-essential purchases bring you the most joy and cut out the fun but non-frugal extras.

Spruce savings

Have goals but create an emergency savings fund first 

It’s one thing to save up for a snazzy new car, but if you’re broke once you buy it you won’t be driving very far. Follow our guide to building an emergency savings fund so you’ve got some financial padding in case 2021 somehow throws more hazards at us than last year.

Once you’ve got a healthy savings buffer, it’s time to start making other plans. It can be helpful to set yourself a specific dollar amount for a specific goal, so you know how much you have to put away each payday to reach it in an achievable timeframe. 

Utilise helpful savings features

There are plenty of other savings and banking features to motivate piggy bank growth. Savings buckets help you focus on specific goals by creating separate pools within the one account. Round-ups make each transaction a savings opportunity by rounding up to the nearest dollar and plopping the extra cents into your savings account.

Check out our guide to becoming a more proactive saver this year using these handy tricks and more.

Find an ideal place to store your hoard

At the end of the day, you’re better off putting your savings somewhere it can earn interest than under the bed. Savings interest rates haven’t improved much since their dreary 2020 decline, but there’s always a top contender or two which can still make you a lot more cash than those in the lower ranks.

Right now, the average ongoing interest rate available to all savers is 0.45%, while the highest is 1.35%. While that may not seem like a massive difference, you’ll notice it once you collect the bonus interest.

Say you’ve amassed a tidy savings fund of $12,500. With the average rate, you’d earn approximately $4.60 in interest per month. If you go with the highest interest offer – currently offered by ING and MyState Bank – it jumps to $13 a month.

That’s a $114 difference per year, which is nothing to sniff at, especially if you continue adding to your savings bundle.

So make sure you’re getting the most out of your money by comparing some of the high interest-earning accounts below.