If the halfway mark of 2017 sees your savings looking a little lean, you could be caught in one of five money traps. We identify the hurdles reported by Aussie savers and how to overcome them.
As the end of the financial year is here, now is the ideal time to check your savings progress.
If you’re on target with your goals, give yourself a pat on the back. If it turns out you’re falling behind, you could be falling into one of the five key traps that keep pushing the goalposts further out.
Trap 1: You’ve been thrown a curveball
An unexpected event is the single biggest reason we lose savings momentum. Yet, the solution can be simple. Get started with an emergency savings account. Add a little to your slush fund on a regular basis, and enjoy peace of mind knowing that a surprise bill doesn’t have to be a financial shock.
Trap 2: You set the bar too high
Aiming to save too much too fast can be a recipe for disappointment, and saving often works best with a slow but steady approach.
By this stage of the year you probably have a good idea how much you can comfortably afford to set aside from each pay packet. Use this as your savings guide, revise the date to achieve your target figure, and relax knowing you’re working towards a realistic goal.
Trap 3: Reality caught up with your budget
It’s easy to underestimate regular living costs, and if overspending on budgeted items is holding you back from your savings target, review your spending and look for fresh ways to save. Try replacing a few branded grocery items with generic products. Make a habit of shopping around for the best deal on big ticket expenses, like personal health or car insurance.
Trap 4: You’re giving in to ‘restraint bias’
Restraint bias describes the situation when someone wants to save but gives in to temptation when they see, say, a brilliant new outfit on sale. We all have limited willpower and the easiest way to curb restraint bias is to automate your savings.
Choose a dedicated savings account, preferably one without ATM access, and set up an automatic transfer of funds each pay day. The less you have to think about saving for tomorrow versus spending today, the easier it is to enjoy savings success.
Trap 5: You’ve lost your saving mojo
By the time June rolls around, the savings goals you set in January can start to lose their lustre. If that sounds like you, it’s important to reignite your savings mojo.
Try breaking down longer-term goals into short-term targets, and plan a small celebration for each milestone. If savings burnout is becoming a real possibility, take a short break, revitalise and hit the ground running with your saving goals refreshed.
The important thing is to keep tracking your savings progress, and understand which trap could be holding you back. A change of tack can be all that’s needed to start kicking those saving goals.
Members Equity Bank Limited ABN 56 070 887 679.