Everyone wants to ‘get ahead’ with their finances, but it’s apparently not easy to beat what the average Australian is doing with their money.
Sure, the typical reader of this article may be doing better than most but it seems saving is tough for the average Australian.
The Australian Bureau of Statistics (ABS) recently reported that the household savings ratio was 2.5% in the December 2018 quarter. This 2.5% savings ratio was an increase compared to the last update due to a slight uptick of household disposable income as well as slower growth in household spending.
However, I imagine that figure would include prospective home buyers who were saving large amounts every month towards a house deposit.
Saving more than 2.5% of your income sounds achievable if you aren’t a low income earner.
It all boils down to a commitment to spend less than you earn. Whether your job generates $50,000, $100,000 or $1 million a year, you won’t get anywhere if you spend every dollar of it (or indeed spend more than your income).
If you’re spending every spare dollar on Afterpay Touch Group Ltd (ASX: APT) retail purchases then you’re not going to get very far.
If you buy every new gadget you can get your hands on from the electronics section of (for example) JB Hi-Fi Limited (ASX: JBH) or Kogan.Com Ltd (ASX: KGN) then you’ll always be low on money.
One trick that many finance experts suggest is that you automate your finances. For example, transfer perhaps 10% (or more) of your pay into a savings account as soon as you’re paid and then do what you want with the rest. That isn’t possible if you need every dollar to cover necessities of course. You’d need to find extra income in that scenario.
Low wage growth isn’t helping Australian households, so you need to reduce expenditure.
My own household has done a few things that add together to make a difference such as reducing our Foxtel package, eating out less and buying more food items from Aldi. Every Australian household budget is different, only you know what you can alter without hurting your happiness. Beyond necessities, it’s best only to spend money on what makes you truly happy. Some expenses are just fleeting wastes of money. Other expenses create memories and experiences.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Kogan.com ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.