A financial expert has revealed his top tips for saving money, from using two banks to organizing vacations and splitting savings across different accounts.
Max Phelps created the Five-2 Money Diet – which is based on the usual diet of eating normally five days a week before limiting calories for the other two.
He said Australians can achieve financial freedom by dropping traditional bank accounts and by taking five key steps to improve savings options and build a real estate portfolio that will help them retire young and go on vacation every year.
If your payment ends up in an account that you can access with a card, or worse, access it before you’ve even earned it with a credit card, you will most likely lose track of your expenses and spend more than you otherwise would do, ”Mr. Phelps told Daily Mail Australia.
Like most Australians, I once had one bank account, one savings account, and one credit card. What I found out later is that from a psychological perspective, this is just about the worst you can have. I’ve used that method for 11 years and it’s $ 1.1 million poorer. ‘
Mr. Phelps’ first piece of advice to avoid getting back into your savings accounts is to separate your accounts in two different banks
1. Stop receiving payments into an account you have access to
“The first step in dismantling the classic Australian one bank account system that handles all your day-to-day expenses and bills is to restructure your accounts,” said Mr. Phelps.
He suggests getting paid into an account that doesn’t have a card attached and that is dedicated to accounts is a guaranteed way to fix any over-spending habits.
“Bills are quite fixed and predictable, making them significantly easier to calculate over a year than a payment cycle,” he said.
2. Add weekly food to your daily expense account
Mr. Phelps – who wrote Getting Your Money $ hit Together – believes most of us work on a weekly schedule, regardless of your billing cycle.
“Groceries, gym membership, coffee, and nights out are all daily expenses that can be calculated from week to week,” he said.
“By dripping money from your account every week, you can determine a fee for that period with the assurance that you have even more money where it came from, which you can access the following week.”
Mr. Phelps suggests getting a bank account and then dripping money yourself so you don’t spend money all at once
Divide your savings
“I firmly believe that separating your savings across three accounts – future, vacation, and pleasure – will change the lives of so many people,” said Mr. Phelps.
‘Like so many others, I once had one large savings account where everything was sunk in. However, this meant that I always dipped in and out of this account when several releases popped up. ‘
He recommends creating automated future and vacation accounts in accordance with your pay cycle, then developing an account that you reload monthly – calculated in the same way as your daily expenses – for things like clothes, special occasions, and weekends away.
4. Prioritize your vacation
Mr. Phelps believes the beauty of creating a specific bank account for holidays is twofold.
Let’s say you have $ 50,000 in one savings account, the risk is that you will either be tempted to spend dramatically too much on a vacation or choose not to take any at all because you need that money for you future – and that’s not good either, ‘he said.
Giving yourself permission to spend money is a good thing, especially on vacations. Instead of having $ 50,000 in one account, you can have $ 45,000 in your future account and $ 5,000 in a vacation account, giving you a budget to enjoy your time guilt-free. ‘
Mr. Phelps says vacations are important and Aussies should have an assigned savings account so they can enjoy vacations guilt-free
5. Use two benches
Mr. Phelps’ first tip to avoid getting back into your savings accounts is to separate your accounts in two different banks.
“I recommend keeping your accounts, future and vacation accounts with one bank, and your daily and fun accounts with a completely different institution,” he said.
“With this system, you don’t have to be in debt if you spend every penny on your everyday and fun bills, because you know you won’t miss a direct debit linked to your other accounts.
Studies show that people spend 30 percent more when they use a credit card instead of a debit card.
“That’s where psychology comes into play, and that’s why I developed the Five-2 Money Diet so that people can be in complete control of their finances without the invitation to overspend,” he said.
Saving successfully is based not on math but on psychology, and Aussies must allow themselves to have fun and go on vacation
According to Mr. Phelps – who grew up in a working-class family with nine children – the Five-2 Money Diet is based on psychology rather than math.
‘After graduating from college, I took the safest and most well-paying job I could find. My biggest downfall, however, was that my wife and I were terrible at saving, ”he said.
Then an amazing thing happened. I was transferred to Thailand at the company I worked for, and part of my salary was returned in Australia and part of that in Thailand.
According to Mr. Phelps – who grew up in a working-class family with nine children – the Five-2 Money diet is based on psychology rather than math.
‘We actually found that the amount of money I received in Thailand was enough to live on and it just seemed like too much of a hassle to move money from Australia to Thailand.
“We’ve gotten great at saving over the four years we’ve spent in Asia, and that’s where the first concept for the Five-2 Money Diet was born.”
After working for a multinational company for 15 years, Mr. Phelps realized that he didn’t like helping this company make more money from ordinary people, so he quit his job and became a teacher in the UK for two years. .
When he returned to Australia and found that his teaching qualifications were not valid in New South Wales, he became a mortgage broker.
“At the time, I quickly understood that most people spend a lot more than they realized, and that my teaching skills could be better used to coach adults on how to manage money,” Phelps said.
“Since then, I’ve gotten a degree in financial planning and I’ve started coaching people on how to handle five bank accounts at two banks to stay on track and save more – hence the name the Five-2 Money Diet.”