The Ultimate Guide to Saving Money

The Ultimate Guide to Saving Money

Tips and tricks to help you save more

  • This information page aims to provide everything you need to know about saving money and getting ahead financially.


    Please keep in mind that there are no one-size-fits-all solutions when it comes to money management, which is why this information is provided for general purposes only.


    If you would like to speak with a personal budgeting specialist about a tailored solution, please contact us to arrange a free, no-obligation discussion.

  • When you finish reading this information, you will understand:


    1. Why having savings to fall back on is a vital component of financial fitness

    2. How to create savings goals and a sustainable savings plan

    3. Strategies and tools to save more regularly and faster

    4. Money management habits that contribute to saving

    5. Ideas to save for a cash safety net quickly

    6. Whether to save or pay down debt

Saving money in Australia

Most people are saving for something and nearly everybody would like to look at their bank account and see a higher cash balance. Yet nearly one-in-seven Australians, equivalent to 2.6 million people, have no cash reserves to fall back on.

It’s little wonder that so many Australians find it hard to save. Australia has one of the highest costs of living in the world and housing, an essential living expense, is especially costly. On average, rent or mortgage payments now make up around 20 percent of a household’s spending. Household debt is also at record levels. In 1994, average household debt represented 60 percent of average annual disposable income. Today, it’s nearly 200 percent — a product of booming real estate prices.

Furthermore, changes to the aged pension mean that current and future generations of Australians can no longer rely on a government safety net to guarantee their comfort in retirement. Individuals are increasingly expected to save for their own retirement through superannuation and other investments.

In other words, saving money in Australia is particularly challenging and especially important. But how do you develop a cash safety net when it feels like all your money is taken up by living expenses? This is an important question and one which we tackle in this guide. The information provided here is intended to help you save regularly, as well as achieve lifelong financial fitness and relieve your money worries.

What does it mean to be financially fit?

Financial fitness can be defined in general terms as “having the money you need, when you need it” or “being able to afford the things you want.”

These definitions are a good start, but if your aim is to achieve financial fitness, it’s important to have a clear and exact picture of what financial fitness looks like.

There will always be expenses vying for your hard-earned income and trying to eat into your savings. The key is to develop habits and strategies that prioritise saving and help you to become financially fit for life.

We define financial fitness as:

  • Saving regularly
  • Holding cash reserves equivalent to three or more months’ income
  • Having appropriate insurances to protect your assets, such as your car, health, home and contents
  • Housing costs that are affordable (as a general rule, no more than 30 per cent of your take-home income)
  • High assets relative to debt (if you have zero assets, then zero debt)

Financial fitness can be improved over time

The good news is that financial fitness, just like physical fitness, can be improved little by little. Positive changes, no matter how small, will add up over time.

However, you won't improve your strength very quickly by lifting weights once a month. The same is true for financial fitness - it results from your daily money habits and choices.

A budget is a workout plan for your money
You may know that the key to getting physically fit is to change your daily exercise and nutrition habits and to make conscious, healthy choices that are part of a deliberate fitness plan. The same is true for your money. Creating a budget is like creating a workout plan for your money. A budget provides structure and discipline that guides healthy, financial habits and choices.

What are the risks of not saving?

Those who live week-to-week without savings to fall back on are more financially vulnerable. When unexpected bills come up or their income is interrupted, people without savings are often reliant on credit cards or loans or the help of family and friends to make ends.

Because of this, they stand greater risk of getting into debt and experiencing financial hardship.

The costs are not only financial. Financial stress can also impact health, relationships, work performance and life opportunities.

What are your saving goals?

One thing you’ll notice about people who are good at saving is that they avoid spending money unnecessarily.

For instance, they may take their lunch to work instead of buying it or catch public transport to avoid paying for parking. This doesn’t mean that they’re miserly. On the contrary, many people are disciplined about how they spend their money so they can apply it to other priorities. They have goals for their money and these goals positively influence their daily money habits and choices.

Creating saving goals is a great way to help you stay focused, motivated and disciplined about how you use your money. In fact, having financial goals makes saving easier and fun.

When you feel tempted to spend beyond your budget, your saving goals are a reminder of the fun and gratification awaiting you. You see a new outfit you like, but it feels less desirable compared to the overseas holiday you’re saving for. You’re tempted to buy new furniture, but resist because you’re focused on saving for a house deposit. You skip Friday night drinks because you’d rather put that money towards a concert ticket.

When you combine goal setting with budgeting, you have the benefit of a clear target to aim for plus a detailed plan of how to get there!

Setting S.M.A.R.T. goals

S.M.A.R.T. goals are Specific, Measurable, Attainable, Relevant and Timebound. They describe the outcome of the goal and the actions needed to achieve it. The impact of S.M.A.R.T. goals instead of vague goals is that you are committing yourself to a certain outcome and timeline, and can be sure of what you've achieved when that milestone comes. There's a definitive success that can be celebrated!

S.M.A.R.T. saving goal example:
I am saving $100 from each pay into my savings account to build up my emergency fund. By 31 December this year, my goal is to have $2,600 saved. By 31 December next year, my goal is to have $5,200.

Practical money saving tips and tools

Have you found that your savings keep getting eaten up by unexpected expenses? Or you run out of money before payday?

It’s not uncommon for people to find it difficult to pay their bills, let alone have spare money for saving.

The key to taking control of your financial situation is creating a budget. A budget is the cornerstone of money management and the only way to properly take control of your finances.

With a budget in place, you can see your exact financial position and future outlook at a glance. All your bills, expenses, savings and goals are mapped out in front of you.

As you make changes to your budget, you see your short and long-term projections change before your eyes.

Saving tip #1:

Create a budget

A long-range, detailed budget will take into account all of your income, bills and expenses for the next 12 months. As well as including your weekly living expenses (groceries, rent or mortgage payments, petrol etc.), a detailed budget will also factor in your monthly, quarterly and annual expenses, such as school fees, car registration, council rates, birthdays and Christmas, and set aside extra funds for those unexpected expenses (vet bills, repairs etc.) that will inevitably come up.


Budgeting can provide deep insights into your finances and reveal where money can be saved and bill payments can be smoothed to make cash flow management easier. Further, once you have a budget in place, there are fewer surprises, which makes it easier to save regularly.


The savings you set aside may start out small, but over time they’ll grow into a cash safety net for emergencies or go towards special projects or events, such as a holiday, home deposit or renovations.


Tried budgeting before and it didn’t work?
The budgets people create for themselves are often short-term (pay-to-pay or month-to-month) or manual, which can make the budget difficult to manage. A good budget will be long-range, detailed and automated.


For help with budgeting, contact us for a free, no-obligation budget consultation. We’ll help you create a customised budget plan that’s yours to keep for free.

Saving tip #2:

Open a dedicated saving account

One of the tricks to saving money is to never let it touch your pocket — or wallet or purse or everyday bank account!


Open a dedicated bank account for your savings so that your cash reserves are kept separate from the money you use for your living expenses and bills. The harder it is to access the account, the better. Keep the access card in a safe place that’s not your wallet or purse.


Enjoy watching your savings grow! The balance may start out small, but your savings will add up over time. When you have a few thousand dollars saved, transfer the balance into a term deposit that attracts a higher rate of interest.

Saving tip #3:

Automate your savings

Now that you’ve got a dedicated bank account, set up an automatic transfer so that a portion of every pay you receive is deposited directly into your dedicated savings account. The payroll administrator at your work can set up the disbursement for you or you can schedule the transfer to occur automatically between your accounts.

The trick is to separate your savings from your spending money before you see it. This trick plays on the fact that most people adjust their lifestyle to suit their income. The term “lifestyle inflation” describes when a person spends more in response to earning more. Likewise, it’s described as “lifestyle adjustment” when a person adjusts their spending to a lower income. The good news is that lifestyle adjustments are often minor and unnoticeable, such as eating at home more often.

Saving tip #4:

The less you spend, the more you can save

A common misconception is that you need a high income to be able to save. This is not true. A high income can certainly help with accumulating savings, but it’s no guarantee.


In fact, high earners are often high spenders. The symbols of wealth associated with high incomes (big house, luxury car, designer clothes etc.) are no assurance that the person who possesses them has any savings in the bank.


For the majority of people, the ability to save is more affected by how much they spend than how much they earn. The less you spend, the more you can save. If you’re finding it hard to save regularly, this statement is a simple, but powerful reminder that saving challenges usually stem from spending habits.

Could you find an extra $100 to save this month? How about this week? Could you save an extra $2,000 towards your cash safety net this year?

Create a cash safety net quickly

Here are some ideas to boost your savings and create a cash safety net quickly:

  • Declutter your home and generate spare cash by selling stuff you no longer need
  • Commit your tax return to your savings safety net
  • Base this week’s meal plan on food from your freezer and pantry
  • Earn extra “pocket money” with a hobby job (eg. lawn mowing, dog walking)
  • Take on a second job—it doesn’t have to be forever; just until you create a cash reserve

Other ways to save money

As well as exploring quick ways to increase your cash reserves, it pays to review all of your expenses and spending habits.

Reducing your expenses is a great way to free up money for saving and to achieve your financial goals faster. And many people are surprised to discover that there’s spare cash hiding in their budget right now.

Your expenses can be divided into two categories: essential and discretionary:

Essential living expenses describes costs associated with items you can’t live without — for example, housing, transport to and from work, groceries, utilities and medicine.

Discretionary expenses describe your non-essential spending, such as buying new clothes or eating out.


Ideas to reduce your living expenses:

  • Mortgage: Now is a great time to compare rates between lenders and look for a cheaper home loan.
  • Housing: Do you have a spare room in your home? A lodger or roommate can be a great way to reduce your share of household costs while generating extra income.
  • Insurances: Review your insurance costs annually. An insurance broker can ease the legwork and help ensure you’re comparing similar coverage and policies.
  • Utilities: Use an online utility aggregator service to check you’re getting the cheapest utility power price.
  • Groceries: Meal planning is a powerful way to reduce your spend on food and household supplies. Plan your meals around supermarket catalogue specials, and check your local butchers and green grocers for discount deals.
  • Transport: Could you reduce your transport costs by riding or busing to school or work? How about carpooling?

Little expenses can chew into your savings

Don’t forget your “little” expenses. People are often shocked to learn that a large portion of their income is spent on unnecessary, discretionary items that add up to thousands of dollars a year.

Here are some examples of cost reductions that can make a considerable difference over a year:

  • Entertainment - cut back $15/week and save $780/year
  • Store-bought coffee - cut back $20/week and save $1,040/year
  • Alcohol - cut back $30/week and save $1,560/year
  • Eating out - cut back $40/week and save $2,080/year

Save or pay off debt?

Given that interest earnings on savings accounts are generally lower than interest charges on loans, it makes sound financial sense to use any spare cash to pay off debts before you start saving.

Especially in the case of credit cards, personal lines of credit and other debts with high-interest rates — pay these down as quickly as possible to minimise the amount of interest you are charged over time.

That being said, one of the most common causes of financial stress is credit card overuse due to having no savings to fall back on. Once you pay off your credit card debt, it’s important to commit to creating a saving safety net to break your reliance on credit cards once and for all.

Mortgage debt generally comes with comparatively lower interest rates, but expose you to interest charges over a long period of time, often up to 30 years. So, again, it’s important to pay down your mortgage as quickly as possible to reduce your interest costs. A mortgage offset account or redraw facility is a powerful way to create a savings safety net while reducing your loan balance and exposure to mortgage interest. With a mortgage offset account, your savings balance is deducted from your loan balance and your mortgage interest payment is calculated on the net amount. You have the added flexibility of being able to withdraw your savings as you need them.

Case Study: saving money and a marriage
Hannah and Sam were a double-income couple with two young children. They were careful with their money, yet still found it difficult to get ahead.

Like a lot of couples, they were paying down a mortgage, trying to save for renovations and wanting to enjoy life, such as take the kids on holidays. Every time they saved up a few thousand dollars, an unexpected expense or forgotten bill would come up.

They would often disagree over money or argue about their financial priorities until a friend suggested that taking control of their finances could possibly help their marriage.

Once they started budgeting, the grumpy money discussions disappeared. Sam and Hannah had a clear plan in place that mapped out their income and expenses, revealed areas where they were spending more than they needed to and showed exactly what they could achieve with their money.

Instead of arguing about money, they now enjoy talking about ways to achieve their financial goals faster. In two years, as well as saving enough to start their renovations, they’ve also bought a campervan for weekends away with the kids.