Everyone is feeling the pinch of rising costs at the moment and there is no obvious relief on its way yet. SA Woman Member & Money Coach, Victoria Wallis-Smith, works alongside people everyday to manage and understand their day to day money habits and how to effectively make changes to free up their income and channel it where it is needed the most.
Victoria shares her tips for prioritising savings first when that paycheck hits your account.
Written by Victoria Wallis-Smith, Nutshell Money
As a kid, most of us started to learn about money by saving – in our money jar, or piggy bank. But as we got older, the desire to spend became greater, and saving became a bit harder or more of an after-thought.
If you’re fed up saving the hard way, let’s look at a financial concept that could completely change your life – pay yourself first.
Saving the hard way
The hard way of saving usually involves setting strict limits on your spending, trying to stick to it and if all goes well, at the end of the month, you have enough left over to save.
Can you even read that sentence without thinking it’s doomed to failure? #fingerscrossed
Let’s see if we can make saving easier…
What is “pay yourself first”?
Simply put, the idea is to set aside a portion of your income for savings or investments before paying any expenses. It’s making your savings an essential expense!
Here’s how it works.
When you get paid, immediately transfer a certain amount of money into your savings account (or investment). This could be a fixed amount or a percentage of your income – whatever works best for you and hopefully, ties back to your financial goals. The key is to do it consistently, every time you get paid. Note: You can make it even easier by setting up an automatic transfer.
Of course, paying yourself first doesn’t mean you should neglect your other financial obligations. But by making saving a priority, you’re setting yourself up for greater financial success.
Then any discretionary spending comes out of the money left over, instead of it being the other way round.
Why do it?
Here’s three reasons why making saving easier is a good idea:
- By paying yourself first, you’re making your goals a priority – a non-negotiable part of your cashflow plan.
- It helps you to avoid the temptation of spending on your immediate wants. When you pay yourself first, you’re taking the first step towards building the financial future you want.
- It helps develop the habit of saving by making it a regular part of your routine, just like paying your bills or buying groceries. Over time, this habit becomes second nature, and you may find yourself motivated to save more than you originally planned.
What do I do with savings?
Where should your savings be directed? As with everything, that depends on your circumstances.
The important thing is to have a clear goal in mind and a plan for achieving it:
- There’s a myriad of saving accounts on the market – many of which will pay you bonus interest if you add to your account each month.
- If you have personal debt, paying extra off your credit card or loan may be the best form of ‘saving’ (it’s important to always make minimum payments).
- If you want to pay extra on your mortgage, be sure to speak to your bank or mortgage broker for advice.
- For investment advice, speak to a financial planner. Or if you’re considering super contributions, you can also speak to your accountant or super fund.
Regardless of your financial position, committing to regular savings can give you peace of mind, and greater control of your finances.
Making money simple
So, there you have it – the “pay yourself first” concept in a nutshell. It’s a simple one that can have a big impact on your finances.
If you want to learn more about making money simple, get in touch using the links below, and find out how money coaching could help you.
About Victoria Wallis-Smith
Fresh out of university in Glasgow, I was keen to get adult life underway.
First Job. Tick
First Home. Tick
Car, Holiday, Social life. Tick
Debt. Tick. Tick. Tick!
I had a good graduate job and a pay packet to match – I figured I had it made, right? But I quickly discovered that the glue holding it all together was debt – home loan debt, credit card debt, personal loan debt. Mix in no savings against a rainy day, and I was on a road to nowhere.
I remember my moment of clarity – in a supermarket, trying to work out which card had enough credit to pay for my groceries. How did that happen? With hindsight, I can see my mistakes. But it built up so slowly, I really didn’t see it coming.
Never one to do things by halves, the turning point for me came when I quit my job, sold everything, and relocated my life to the other side of the world. And dumb luck was on my side – the sale of my Glasgow flat cleared all my debt in one fell swoop! I was ready for a fresh start in Adelaide. And this time around, I was going to do things differently.
I started on a journey, learning to use money the right way – where I was in control of my money and not the other way around.
Fast forward 20 years – I had shifted careers from civil engineering to financial planning, and together with my husband, was running a successful business, advising people about money. But I wasn’t helping people with the everyday challenges – and I knew that’s where I could make a difference.
How could I take my experiences in life and the world of money and use them to make things simpler, for more people – people like I used to be.
Nutshell Money was born!
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