Kiwis are being urged to “Think, Shrink, Grow’ by the Commission for Financial Literacy and Retirement Income in their campaign to improve our money habits. We’ve heard that ‘Think’ means to set goals and plan ahead and ‘Shrink’ is all about getting rid of debt, especially ‘dumb’ debt. Once you have set your goals and tackled debt, it is time to ‘Grow’ your savings. There are three main purposes for saving; for goals such as a holiday, a new car or the deposit on a house; for emergency purposes such as illness, redundancy or unexpected expenses; and for long term goals such as retirement. There are two simple steps to take to be able to start saving.
Step One: Reduce your fritter factor. Saving more means spending less. The easiest spending to cut back on is spending on low value items such as coffee, lunches, magazines and personal items. Simply cutting out one coffee a day could allow you to save $20 a week, or $1,040 a year. That’s enough for a good holiday. Cut back on things that aren’t important to you so you have the money you need for the things that are really important, such as your goals.
Step Two: Set and forget. The most painless way to save is to set up an automatic payment to transfer money into your savings account every pay day. You will soon adjust to living on a lower amount. If you are worried about how much you can save, start with a small amount. Once you get used to living on slightly less, gradually increase your savings. The reward of seeing your savings grow and being able to achieve your goals will give you the motivation to continue.
For more information on how to ‘Think, Shrink, Grow’ click here.