Let’s take a moment to talk about habits. Intuitively we all know that good habits can be great things to have. Think for a moment about the benefit of going to the gym or for a run each day. It makes us feel good, improves the way we look, and potentially reduces our doctors’ bills. Now conversely think about the habit of eating sugary foods or drinks. It may give us short-term satisfaction when we get that sweet taste in our mouth, but in the long run we feel worse, look worse, and potentially end up saddled with doctors’ bills because of poor health. Good habits are life-long friends and saving money consistently is one of the most important good habits we can have.

1. BITE-SIZED GUIDE
Maximising
Your Savings

2. Maximising Your Savings
General Advice Warning: The ideas and information contained in this publication are for
general information only. They do not take into consideration your personal circumstances or
objectives. Please considering if these ideas are appropriate for your needs before taking any
action. We suggest you seek advice from a financial professional if necessary.
Disclaimer: We have prepared this publication to the best of our knowledge and consider
it accurate. Please do you own research or inquiries before acting on any of the ideas or
information contained.
Performance: Past performance is not a reliable indicator of future results. Any published
performance figures are hypothetical as they are based on prices at the time the idea was
released, and may not accurately depict slippage or transaction costs.
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3. Maximising Your Savings
Let’s take a moment to talk about habits.
Intuitively we all know that good habits can be
great things to have. Think for a moment about
the benefit of going to the gym or for a run each
day. It makes us feel good, improves the way we
look, and potentially reduces our doctors’ bills.
Now conversely think about the habit of eating
sugary foods or drinks. It may give us shortterm satisfaction when we get that sweet taste
in our mouth, but in the long run we feel worse,
look worse, and potentially end up saddled
with doctors’ bills because of poor health. Good
habits are life-long friends and saving money
consistently is one of the most important good
habits we can have.
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4. Maximising Your Savings
The Saving Habit
Saving is the financial equivalent of going for a run or to the gym each day. Over time, saving
dramatically improves our financial condition. Spending, particularly spending more than
we have, is like eating too much sugary food. While it may feel good in the short term, in the
long run it can’t be good for our financial health.
So how do we build the habit of saving? It’s a little like setting up a successful physical
training regime. We all know someone (or might be that someone!) who has decided they want
to get fit, gone on a fitness binge for a month, then quit when it’s all become too much. The
more successful approach is to focus on building the habit of attending the gym. The saving
habit is similar.
We give ourselves small, measurable goals that are easily achievable and we do little
things to support our success. For example, we commit to going to the gym three times a
week. We don’t work out too hard at the start, so it is easy and enjoyable for us to do. Then we
get a personal trainer to hold us accountable to both showing up and sticking with our goals,
as well as give us some good advice. Over time it becomes easier and easier as the habit forms,
and the positive results we get reinforce our success. Pretty soon we are happy healthy gymgoers .
So what lessons can we take from this to help us with our saving? First, we don’t want to save
too much. If we overcommit to our savings at a rate that is not sustainable, then we
set ourselves up for failure. Now what is a good amount to save? While this is going to be
different for everyone, we like the theory of the great little book The Richest Man in Babylon.
This book suggests that all you need to save is 10% of
the money you earn. So if you have $1000 coming in
each week, save $100. If this is too much you may decide
to save less. But the key is to make it a sustainable
amount so you build the habit.
Debt and Saving
Some of you will have debt and be wondering how you
can actually save while you have to pay it off. What you
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5. Maximising Your Savings
do here is very important. It is difficult to put all of your available money into paying off debt –
your debt may be reducing, but at the same time, you might not feel like you are getting ahead.
Psychologically, this makes it very challenging to stick to your debt-reduction goals. What we
suggest is that you save while you pay off your debt. For example, you might spend 10% of
your income on savings and 10% on paying off debt. Or perhaps the figure is 5% on each. But
either way, you do both. It gives you a much better feeling if you can see your money grow
and at the same time see your debt shrink. Pretty soon you will be able to invest your savings.
Meanwhile, you are developing a powerful strategy for financial success!
In our Bite-Sized Guide to Good Debt, Bad Debt and Debt Reduction we discuss strategies
for reducing your debt and paying it off sustainably
Supporting our Savings Habit
What can we do to support our savings habit? There are a number of steps we can take to
help us become more disciplined in our saving.
}
Work out a budget. If you can track your expenses you will most likely find it a bit easier
to not overspend. A budget also gives you a way to figure out where you can make savings.
A third benefit of having a budget is that if you know you can spend a certain amount of
money while still saving, you don’t need to feel guilty when you do spend.
You can go all out and create a fancy budget. That is fine and it will suit some people. But
don’t feel the need to. A good place to start is to quickly and roughly work out what
your set expenses are.
Consider how much your rent
or mortgage and monthly
bills, such as phone, internet
and power, add up to. Then
work out how much you
can spend on food , and see
what’s left for eating out and
entertainment. For example,
Expenses
Spending
Goals
Savings
Debt Reduction
you might have $300 left to
spend. You could get $300
cash out once a week and
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6. Maximising Your Savings
once it’s gone, you know that you’re going over budget.This approach helps you to be more
disciplined with your spending choices. Alternatively, you could set up an alternative bank
account that you transfer your spending money into each pay. Again Rabobank and ING
offer these accounts with no fees (at the time of writing).
If you want to get more involved with your budget you could type it up in Microsoft Excel
or Google spreadsheets. There are also some good applications you can use if you own
an Ipad, or similar tablet. We like Account Tracker on the Ipad or a similar tablet. Just don’t
spend much if you do want to purchase a budgeting programme. Let’s keep our money
for our savings or spending!
Once you have a rough budget you could then look for places to reduce your
spending. This could be having one less meal out a week, or getting your partner to give
you a massage rather than going to a spa. It could even be something healthy such as
riding a bike to work rather than taking the car!
Action Item: Work out your expenses and your income and see how much you have spare.
Perhaps you could consider drawing out this amount in cash each week or setting up a
spending account.
} We suggest you set up your savings account with an alternate bank. We also suggest
you use a high interest account with no fees. Just to emphasise the point: make sure it has
no fees, as they cost you too much over time . Banks like Rabobank and ING offer these
types of accounts. Having the account at a separate bank stops us from easily raiding our
savings in a moment of weakness and offers us a modicum of protection from our bank
getting into financial trouble.
Once you have the account set up, we suggest
you automatically deduct the amount you are
going to save as soon as you receive your pay.
You can set up an automatic payment with your
bank.
} Save for goals. You may want to establish a
second savings account that you can use to
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7. Maximising Your Savings
save for particular goals. Perhaps for a holiday, a car, some jewellery, a business, or just
for a rainy day. This money should be redirected from your spending account, not from
the savings account we discussed in the point above. It’s a good idea to check with your
bank to see if they have an account that rewards you for making regular deposits and not
withdrawing. This can give us a strong incentive to be disciplined in saving for our goals .
Action Item: Set up a separate account for your savings, preferably at a different bank to
your main bank in a high interest account with low fees. Set up an automatic payment that
puts 10% of your income into that account on your payday. Set up a second account for
savings goals. Work out how much of your spending money is going to be re-directed into
this account.
Lastly, when it comes to saving, it is important to focus on your goals. It is good to think
about what you’re going to achieve from your saving efforts. This helps us to stay disciplined
and motivated. Just think, if you had saved 10% of your earnings from the very first day
you started work, where would you be now? Use that thought as motivation going forward.
Consider today as that very first day .
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