A simple change in routine around payday could be all you need to save more money each month.
Helen Baker, financial advisor and founder of On your own two feettold FEMAIL that you are more likely to spend money if it is in one account.
However, many people make the mistake of not separating their income across multiple accounts.
“Many people think they will save the money left in their account at the end of their pay cycle,” Ms Baker, from Brisbane, said.
“Even if we have the best intentions to do so, it is a behavioral trait to spend more if it results in a lump sum.”
Helen Baker (pictured), Australian financial advisor and founder of On Your Own Two Feet, told FEMAIL you are more likely to spend money if it is in one account.
What should we do with our money after payday?
After payday, income should be separated into three different “money boxes”: one for commitments such as debts, rent, bills or mortgage payments, a spending account for “fun money ” and a third for savings.
Ms Baker said: “There is a saying that it is not what you earn that matters, but how you manage your money that determines your outcome.
“So someone who earns less than someone with a higher income could actually save more if they manage their finances well.”
Although there is no limit on the number of accounts a person can have, Baker recommends having a minimum of three.
“If you only have two accounts, it’s very likely that it will become a gray area and you won’t know precisely how much you’re saving or spending,” she said.
“Savings can be a set amount earmarked for a goal you’re working on or an amount you’re comfortable setting aside. It could be invested or set aside when necessary.
“You’ll be surprised how much you’ll save by putting money aside each time you get paid, as it accumulates over time. »
How much money should you put aside each month for savings?
There is no “magic number” when it comes to how much someone should contribute to their savings after getting paid – and it’s a completely personal choice.
While most aim to put 20 percent of their income toward savings, Baker recommends “working with numbers” rather than percentages.
She recommends tracking your finances in an Excel spreadsheet to determine how much money is left after accounting for expenses, expenses and debt.
“By looking at the facts number by number, you’ll be able to determine if you can save even more,” Ms. Baker said.
“But someone who earns a higher salary should put more into their savings rather than the bare minimum, otherwise they will miss the mark.”
While most aim to put 20 percent of their income toward savings, Ms Baker recommends “working with numbers” rather than percentages (stock image)
What to Consider When Payday Comes?
In addition to setting up different accounts to separate money into, Baker also recommends talking to your employer to work out the split for you.
“Many payroll systems allow you to invest money in a super salary or salary sacrifice, which is also a great way to save. But they should also allow you to deposit the fraction of your salary into multiple accounts,” she said.
“Then everything is done for you. »
What else can be done to ensure money is saved?
For those who might struggle to save money, Baker recommends strategies using cash – like cash stuffing – to physically see what’s being spent or saved.
Decades ago, employees were only paid in cash, but today the world is a completely different place and the majority of Australians use cashless systems.
On Thursday, it was announced that Macquarie Bank will begin phasing out all cash, check and telephone payment services at its Melbourne, Sydney and Brisbane branches from January, as part of a transition to digital-only transactions.
“Paying with cash helps you understand how much you are actually spending and it can be a real eye-opener to see the money disappear from your wallet,” Ms Baker said.
“People can make a better connection with their finances if they physically see them come and go.”
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