Step 2: Book in an annual bill review
For every bill you pay, you want to know you’re getting the best deal from your service provider. The only way to know this for sure is to renegotiate every year, switching products and suppliers to chase the lowest price.
Schedule bill reviews as an annual event in your calendar. For every recurring expense, there’s a chance to save a bundle, whether it’s energy and utility bills, mobile phone, internet or health insurance.
Add large bills like food, car use and mortgage repayments to this review list. If you haven’t checked your home loan interest rate in a while, do it now. Contact a Yellow Brick Road mortgage broker to find out if you can get a better deal.
Step 3: Use automation and technology
Now you know you’re capable of saving, automate this process by paying yourself first. Set up a transfer to move a specific amount of money from each paycheck into your savings.
Keep a continual track of money coming in and going out of your accounts. If budgeting
isn’t for you, your next best option is expense tracking. Although this may sound like a tedious task, there are plenty of apps that make it a quick and easy process.
Step 4: Review your debts
It can be hard to know whether to prioritise savings or pay off debt. A simple rule of thumb is to compare the interest rate you’re paying on your debt with what you’d expect to make from investing the money or putting it in a savings account. If the interest rate on your debt is higher, then you should pay off the debt first.
Step 5: Build an emergency savings fund
Building a rainy day fund can happen in conjunction with paying off your high-interest debt. The fund should consist of at least three months of living expenses or six months plus if you have dependents. Keep in mind that your fund should cover all the necessary expenses like groceries, rent, mortgage, power bills, transport and healthcare. If you’re a property investor, factor in the extra cost of mortgage repayments to cover several months of vacancy.
Incorporate emergency savings into your budget planning. Open a separate high-interest savings account and set up a direct debit transfer from your paycheck account. Accept that it will take time to build these savings, but even the smallest contribution will add up.
Step 6: Find an additional revenue stream
Controlling your spending is only ever half the equation of building your savings. The other half is figuring out how to boost your income. Think about ways to find a market for your skills and talents, whether tutoring, catering, reviewing products or selling your artwork.
Repeat these five steps regularly, and over time, watch your savings grow. Turn these savings into investments
and let capital growth and rental yield do the work building your wealth.