In our dealings with clients and their friends and family, we often discover that some of the most basic financial tips are overlooked in the quest to reach our financial goals.
“If you look after the pennies, the pounds will look after themselves”
We should never underestimate the value of those small amounts that seem to be insignificant at the time or in the short term.
Below are some extracts from the basic financial literacy seminars that Houghton Strategic Solutions presented to the local community:
Shopping – tips to keep costs down:
- Always write a shopping list and have a rough idea of what each item will cost.
- Have an idea of how much the shopping should cost and do not go over that amount. Pretend it is the olden days and you don’t have access to more than your limit, so you don’t go over.
- Think about whether you need or just want an item.
- Never shop when you are hungry.
- Know when items are really cheap, and buy regular goods in bulk when they’re on special (perhaps three months’ supply). e.g. Toilet paper, coffee
- Choose home brands for things like tissues, toilet paper, rice and flour (1,000 sheets might be the same price as 250 sheets of a name brand).
- Use cheaper shopping alternatives like discount stores, farmers markets or bulk buying with family or friends.
- Use the “unit pricing” amount to compare the prices of items that are a different size or weight.
- Avoid pre-packaged food for cost and health reasons.
- Clear your purse out every night and put all coins in a jar to be banked monthly.
- Bank any savings in a special purpose bill reduction account, offset account or high interest account.
- Keep some “mad” money each month to spend on a treat; this can help a budget to be successful.
- Don’t spend all your grocery money in one go in case there is an essential item that wasn’t on your list. E.g. toilet paper.
- Plan your meals ahead. This way you only need to buy the extra things that aren’t already in your pantry.
- Use layby for Christmas, birthdays, return to school expenses.
- Avoid taking children grocery shopping if they could make it difficult to stick to a shopping list, or if they are old enough, make a game of getting them to help you find the best unit price.
Tips for taking control of your finances:
- Shop around for a bank account with the lowest fees and charges and the highest interest paid on deposit balances.
- Have more than one bank account – a special purpose bill account, a target account and an ordinary savings account. (Check that extra accounts don’t cost extra in fees).
- Put any savings into a special purpose bill reduction account/mortgage offset/redraw account so it’s not easy to get at and you won’t be tempted to spend it unnecessarily (check for fees).
- After paying off debts, use the savings to meet other goals.
- Make periodical payments monthly towards meeting some of your goals. (Some periodical payments however do incur a charge, so it is important to check this first.)
- Put a weekly amount in an ordinary account for regular bills so you won’t have to dip into your debt reduction/savings fund.
- Make sure you have enough in your account to pay bills by automatic direct debit. Fees for overdrawing your accounts can be costly.
- Have a special target account that directly deducts from your ordinary account (E.g. some internet accounts have no fees or charges and pay 4% interest a year, although some direct debits do incur a charge so it is important to check this first.)
- Check that the mobile phone plan you use is not costing you more than is necessary. For example, sometimes a capped plan might work out cheaper than a prepaid system.
Examples of Savings plans that work for some people. You need to choose the system that appeals to you.
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Some people love a gimmicky savings plan, some prefer boring and simple.
Some more examples:
- Place your gold coins in a jar every night (and then ignore them until the jar is full).
- Pay yourself first! Before you spend any money on anything else, after you have prepared your budget and have an idea of how much excess cash you should have each week/fortnight/month; have funds transferred each pay period directly to your savings account for this amount. Then do not touch it. Use an account with no card or cheque access.
- Be old fashioned. Don’t use credit – your mum probably didn’t have a credit card and she survived.
- Cut up your Credit Cards. Repay the cards/loans with the highest interest rate first, and when you finish pay the amount you were paying, plus the minimum off the next highest card/loan.
- Use an offset or redraw account to increase your effective returns on your savings.
- Give yourself a cash allowance each week and leave your cards at home. Once your cash is gone you MUST stop spending.
- Write down everything you spend either in an excel spread sheet, or an old fashioned notebook.
- Ask for receipts for every little expense and add them up each night.
- Try a phone app or online budget to keep you on track.
- If you are in trouble with debt, then contact a financial counsellor.
- Check regularly to ensure your budget is realistic.
- Live off one partner’s income and use the other one to reduce debt.
- Shop around for EVERYTHING and get the best price. Don’t be afraid to ask for discounts.
- Every cent counts – ever heard the saying “Watch the pennies, and the pounds will take care of themselves”? It’s true!
- Consider tax planning strategies (with advice from a financial adviser/accountant) such as salary sacrifice, geared investments, spouse contributions to superannuation, the Government Co-contribution scheme for superannuation.
- Use the advantages of compound interest to make your savings grow.
What are your best shopping, savings & debt management tips?