I’ve been working hard lately on writing an eBook about how to get out of debt and today I’m ready to launch it into the world!

This time of the year is popular for deciding to reduce debt – getting out of debt and saving more money are two of the most popular New Year’s Resolutions. Unfortunately, many of us don’t manage to stick to these resolutions.

This eBook outlines a strategy for paying off your debts (without too much pain) and saving money to cover future expenses at the same time, in order to stay out of debt in the future.

I would love to hear your feedback on the eBook, whether you find the information helpful and whether you see results. If you’re goal is to pay down your debts this year, I wish you all the best.

Have a great weekend.

You can download your copy (100% free) here (in PDF format).

Have you read these articles?:

1. good debt v bad debt – is there such a thing?
2. 3 strategies that will get you out of debt quicker
3. Building Momentum With The Snowball Debt Reduction Method

I was going to write a post today about creating a budget, but decided instead to write about a money management tool that is just as powerful as a budget (if not more so) and can be used in conjunction with a budget or on its own.

The tool I’m talking about is automation.

Thanks to internet banking, automating your finances is not only possible, but it’s easy and can take as little as 10 minutes to set up. A few minutes doing this simple task can save you money, stress and hours time over the course of the year.

The other day I talked about the myth of willpower. By automating your savings and your debt repayments, willpower no longer comes into play. You can get on with the other things in life while your money takes care of itself.

How to automate your finances

1. Weekly, fortnightly or monthly

The most effective way to automate your finances is to have money automatically transferred out of your everyday account the day after each pay day. This means that you know there will be money available to transfer and you can then live off the remaining, resting assured future bills and debt repayments are covered. So when you schedule your automatic transfers will depend on whether you get paid weekly, fortnightly or monthly.

2. Work out how much you need to transfer

Firstly, if you have credit card debts, it’s a good idea to automate your repayments so that you avoid late fees. To pay off your debts, pay more than the minimum repayment and automate this amount to be transferred each pay (more on paying off debts tomorrow).

Next, calculate the yearly bills that you want to save for. These might include insurances, car registration and maintenance, emergency fund, holidays, Christmas fund, clothing provision, medical, education, bills like electricity or telephone, rates etc.

Grab out old bills and statements to help you work out how much you pay on these bills over the year in total and then divide that amount by 52 (weeks), 26 fortnights or 12 months, depending on how often you get paid. This is how much you will need to transfer into a high interest savings account each pay (again, to be scheduled to come out the day after pay day) so that future bills are covered. For more information on managing bill payments, check out this article and this one.

Lastly, if you have investments or you want to contribute extra to Superannuation, don’t forget to automate those payments too. Don’t wait until you have money to spare, you rarely will.

If you have direct debits in place, try to change the date these come out of your account to coincide with the day after pay day. Again, this means that you know you have funds in the account to cover the direct debit.

3. Jump online and schedule your payments and transfers

The last step is to log onto your online banking and schedule these amounts to be automatically transferred out of your everyday account the day after every pay day. Simple. I set mine up to last the year, but schedule your repayments for as long as you wish (or your bank allows).

So if you’re looking for a powerful money management tool, look no further than your own online banking facility. Schedule savings and payments and make managing your finances this year that much easier.

Have you read these articles?:

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This is a guest post by Justin Toladro from Life Insurance Finder.

Political satirist Stephen Colbert recently said on his show in regards to the holiday season:

We are once again spending money we don’t have on things we don’t need to give to people we don’t like.

While there was undoubtedly a level of sarcasm in his rhetoric, in some ways, Mr. Colbert is right: as a consumerist society, we are so overwhelmed with the mad dash to buy as many things for as many people as we possibly can this season. The shopping fervour only increases with each passing Christmas season, and with Australia’s consumer debt crisis at record highs, perhaps spending more money isn’t what we need right now.

With this in mind, there are several things you can take into consideration while planning your Christmas budget. Depending on what your holiday festivities entail, this may be as simple as pumping up your food budget, or something more drastic, such as gifts for all members of the family, new decorations, bakery and meal money, and more. If not kept in check, Christmas spending can get way out of hand; as such, creating a tight budget with enough room to handle expenses that may unexpectedly arise is an absolute must.

If your income is lighter than average this year, then make adjustments accordingly. For gift exchanges with friends or family, perhaps suggest that each person chooses just one other person to give and receive gifts. This way, everyone gets something but nobody has to buy something for everyone. Better yet, you may want to consider a moratorium on gift-giving and replace it with handwritten cards for each individual or just something as simple as a family dinner together. Gift-giving frenzies were inspired by stores looking to boost their sales during the wintry season; don’t fall into the trap of thinking it’s a mandatory event and burning through your available cash with this mindset.

When it comes to decorations, consider buying things used or pooling old decorations with friends and swapping them out. This way, your decorating scheme gets a revitalised look without any added costs. Setting a strict spending limit on decorations—if you so choose to go out and buy more—should be implemented before you spend a single dollar. If you want them to last longer than one holiday season, then perhaps setting a higher limit in order to buy higher quality embellishments can be taken into consideration. Cheap lights and décor items break easily and most likely won’t last, so even if it means spending a little more than you initially had hoped to, going for quality over monetary affordability can be quite beneficial.

Then there is the matter of food. Home-cooked meals and cookies are not only fresher but also more affordable than store brand foods. Potlucks are great for this time of year, allowing each individual to make their specialty dishes and contribute to a fantastic meal for all. Don’t forget to account for holiday sweets in your budget!

So, with Christmas almost upon us and carols in the air, taking the time to steady your financial situation and plan out a specific budget well in advance can keep you from overdoing it on the wallet-crunching this holiday season. Christmas was never supposed to be about spending more and more; it’s about family, friends, peace, and goodwill. Keep this in mind while creating your Christmas time budget.

This article was written by Justin Toladro from Life Insurance Finder, visit our site to compare life insurance policies that best suit you and your family.

Have you read these articles?:

1. start a christmas fund and take the sting out of christmas cheer
2. it’s a wrap–christmas gift wrap on a budget
3. Avoiding The Christmas Shopping Hangover

This is a guest post by Justin Toladro from Life Insurance Finder.

Overspending is a major problem in our society today, especially in Australia, where consumer debt levels are among the highest in the world. In the global economic recession, two different kinds of consumers emerged: the stingy shoppers and the over-spenders. The stingy shoppers are so frugal that oftentimes they would rather go without even basic quality goods, all in the name of saving a dollar or two. This is one extreme, and the others are the overspending individuals who can’t help but buy more, more, more! Even if they don’t need it, they get sucked into buying something anyway. Which type of consumer are you?

If you fall into the overspending category, you are not alone. Millions of Australians are currently struggling to pay off credit card debts because of their poor spending habits. But what exactly causes this?

One major problem is the overabundance of credit card offers and loan “deals” being offered by various companies. Desperate for customers, they begin undercutting each other by offering the lowest introductory rates to encourage more people to flock to their business model. However, once you get sucked in, it’s hard to get out. These companies are in business to make a profit, not to benefit you on all fronts. As such, even though the application process is quick and simple and the credit limit is more generous than your budget would have been, keep in mind that it’s going to cost you later on. Even if you “qualify” for a greater line of credit doesn’t always mean you should automatically start spending at that level, because that could spell years of minimum balance payments wrought with interest tacked on top.

The term, “Live within your means” comes in handy here. This is the best way to avoid getting trapped in these seemingly harmless credit card and loan deals, even if that means you can’t buy everything you want now and wait until later to start paying it off.

And it’s not just the credit card or loan companies that are trapping customers these days. Stores are doing it too, albeit in a much more subtle and sneaky way. To encourage spending, many stores have been offering discounts and sales, especially “Buy One Get One Half Off” deals (or others like that). Why? Because psychologically speaking, customers usually can’t pass up a deal as good as this, even if they don’t need the second item. You may have only come in to buy one new pair of pants, but with the second pair of the more expensive brand 50% off, you’re statistically more likely to opt for the expensive brand in order to qualify for the deal. This is why companies market the deals and discounts they do, even if it seems like they’re losing money on the outset by offering such a favourable price on items.

How can you prevent the urge to give into these traps when going into a store? For one, bring a limited amount of cash and no credit cards. This will force you to stay within a set limit without the option of resorting to the plastic. Also limit the time you spend in a store. After all, the longer you have to mull over a purchasing decision, the more likely you’ll be to get it regardless of its negative financial implications. Finally, don’t shop while you need to be somewhere else or when you’re really hungry, because these factors alone can influence your decision when going to the check out line.

Another problem seen with the overspending crowd: emotional purchases. In a time of economic instability, many people have turned to using credit cards to buy things to cheer themselves up. Having a rough day? Just swipe the plastic and get that new phone upgrade you’ve been wanting. If you’re looking for long term financial solvency, then you need to nip this overspending habit in the bud now and avoid emotional purchases at all costs. When you are hooked on buying things in order to create a positive emotional response, then you are essentially treating shopping like a drug, and soon you’ll need buy more and more in order to maintain that level of euphoria you’re seeking. This is the number one problem of over-spenders and can be avoided by some rational shopping list planning and budgeting tactics.

Overspending doesn’t have to be a problem if you’re willing to put in the effort required to cut back on bad habits and limit yourself, even when your brain is begging you to pull out the credit card and make that impulse purchase “just this once.” Your financial situation will thank you for it and your credit score will be in much better shape than others around you who consistently give in to their overspending desires without any sort of restraint.

This article was written by Justin Toladro from Life Insurance Finder. An Australian owned comparison website the offers the best life insurance for you and your family.

Have you read these articles?:

1. How To Avoid Credit Card Fraud
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This is a guest post by Kristy Ramirez of Life Insurance Finder Australia.

There are two main avenues available for you to secure a financial safety net for yourself and your family.

One, of course, is a life insurance and disability insurance policy. This type of protection will ensure that you will still retain an income stream should you become disabled.

Never set store in the belief that ‘it won’t happen to me’ because every day someone is disabled as a result of a car accident, sport injury or disease, even pregnancy. Luckily, life insurance is a means by which you can leave your family sufficient funds to enable them to continue living the life they have become accustomed to with your earnings, should you happen to die from an unforeseen accident or illness.

The other way to secure a financial safety net for your family is to live a life free of debt. Once you have paid off all your debts and are able to resist taking on new debt, you will be on the way to building savings that will allow you to buy the things you actually need and remain debt free in the process.

The five techniques to get you out of debt and to secure your own financial safety net outlined here could be just what you need to get you started on the right track right here and now. It consists of the following:

1. Ensure you are insured.

First and foremost make sure you have a sufficient life and disability insurance cover that will protect you. It is too late once you become disabled, or if you should die and leave your family with all the debts intact and no way of paying them, let alone carry on with life in a manner that you have planned. Your life and disability insurance can be the foundation on which you will mount your financial safety net.

2. Stop taking on new debt from this moment on.

There is no room for procrastination, if you are sincere in your wish to secure your financial future it is time to start right now and not take on any new debts. Bring your family together and obtain an agreement that no new debt will be tolerated. What you presently have will have to do until you have control of your finances once again. No loan for a new car, no refinancing of your mortgage to gain access to your equity in your home, no more credit card applications, if fact get the scissors out and cut all your present credit cards in half. Make use of a debit card instead.

3. Start tracking where your money goes.

Sit down and place all your debts out in front of you. Place all your ongoing bills in one area, loan agreements in another along with credit card statements etc. Go through all of them one by one creating a list of all your debts and how much you have to pay out each month. Then make a list of all your essential living expenses, such things as power bills, rent or mortgage payments, food expenses, petrol, everything! You now have to place your payslip down along with details of any other earnings you may enjoy each month.

Mathematics will now tell you where you stand financially. Repeat this exercise every month and you will soon become conscious of where your money is going. Financial experts tell us that by doing this on a regular basis you will reduce your spending by up to 10 percent.

4. Approach creditors for a better deal.

Rather than consolidating all your debts into the one debt, approach yours creditors first to see if they can lower your interest rate and give you easier terms. This might entail new loans but if a lower interest rate can be obtained it will be worthwhile. If you choose to consolidate your debts the larger amount taken out will attract greater interest despite a lower rate simply because of the effect of compounding interest. Ten percent of $1,000 is less than 10 percent of $10,000.

5. Develop your own repayment program.

Now you know exactly where you stand, list all your debts with the one containing the highest interest rate at the top and the lowest rate at the bottom. Find out the very minimum you have to pay each month on each and pay that amount on time without fail. Any extra money you have left over can be used to pay more off the debt attracting the highest interest. When that debt is paid out do the same with the next debt in line and so on until all debts are cleared.

Once you have control of your debts it will become easier to save and with adequate life and disability insurance covering you against any mishap that is out of your control your family and yourself will enjoy a secure financial safety net, where you are in full control.

Kristy Ramirez writes for Life Insurance Finder Australia, a free life insurance comparison website, where she helps people to compare and select the best life insurance policy to meet their needs at the cheapest possible price.

Have you read these articles?:

1. 3 strategies that will get you out of debt quicker
2. debt free and thriving–a free ebook on getting out of debt
3. the zen of long term financial planning

Yesterday I wrote about how saving a few dollars here and there can add up to substantial savings.

If you haven’t read it, check out the article, the numbers in today’s article are based on a few dollars saved just by turning out lights, buying bread on sale, eating one less takeaway meal per month, walking a bit more, switching phone plans etc.

In other words, easy, doable savings.

What yesterday’s article didn’t take into account was compound interest. While saving a few dollars here and there can certainly add up to significant amounts, when you take into account either interest earned on your savings, or interest saved by using your savings to pay down debt, that’s when things get interesting (pardon the pun).

Here are a few examples of how to super charge your small savings.

1. High interest savings account

If you were to put your $121 monthly savings into an envelope under the mattress, at the end of five years you would have $7,260. That’s a nice little emergency fund.

Of course, few of us stash cash around the house, so what is the result of putting your money into a savings account with a modest 4.5% interest rate?

After five years you would have $8,124 in total and would have earned an extra $864 in interest. That’s an extra 7 months worth of savings.

2. Pay down personal debt

On the other hand, you could use the money you save to pay down personal debt. Here’s an example:

If you had a $10,000 credit card debt at 13% interest and with monthly repayments of $400, it would take you 15 years to pay off your credit card (assuming you stopped using it) and you would have paid $4,412 in interest over the 15 years.

With the extra $121 put towards repayments, you will pay your loan off in just 23 months and save $3,140 in interest.

That’s $2,276 more in your pocket than if you put your money into a savings account.

3. Pay down your mortgage

I want to write about this option in detail next week. In the meantime I will say what you already know: the more you put towards your mortgage, the more money you save on interest over the period of the loan. And as mortgage interest rates are higher than saving account rates and because extra repayments aren’t subject to tax, this option can really super charge your savings.

In fact, paying extra on your mortgage can quite literally save you tens of thousands of dollars in interest over the period of your mortgage.

4. Other options

Of course, you could spend your savings, there’s nothing wrong with that. It’s great to save money by not wasting electricity so that you can afford the things you really want (I’m dreaming of an SLR camera myself). Other options include:

• investing your savings in shares, investment funds, bonds, property etc.
• putting your savings towards your superannuation (if you’re my age, you could end up with over $100,000 extra at retirement by paying an additional $1,400 a year)
• donating your savings
• going on a Caribbean cruise

It’s up to you.

So if you ever wonder whether it’s worth the time and energy to save a few dollars here and there, know that those few dollars can add up to significant amounts, particularly with the power of compounding interest, whether it’s interest earned, or interest saved.

Do you bother saving the small amounts?

Have you read these articles?:

1. Small Change Making a Big Difference
2. creating a savings plan and reaching your savings goals
3. how to give your savings plan a quick boost

‘Take care of your pennies and your dollars will take care of themselves.’ Scottish Proverb

Is it worth your time and energy to save a few cents here and a couple of dollars there?

I mean, what’s a couple of dollars on a Mars Bar, right?

Not that I’m against the occasional king-sized Mars Bar splurge, but it can be surprising just how much these small expenses add up.

If you’re in need of a budget overhaul, or you have savings goals you want to work towards, but you don’t know where to start, the answer is to start small.

Because small change adds up.

And because small expenses are easier to deal with.

Small change adds up

Here’s a hypothetical example. Just say these are the savings that you decide you can easily make:

An extra $121 dollars in the pocket every month isn’t bad and it’s a gain by making fairly easy changes to the way you spend. Notice I didn’t say ‘cut out takeaway altogether’, or ‘stop drinking coffee’. These are small, doable changes that can save you a few dollars here and there.

But here’s the exciting bit: the yearly savings total is $1,452.

A few small changes can add up to some substantial small change!

Of course, this is just a short example. There are literally hundreds of expenses where you can shave and save. Take your lunch to work instead of eat out, drop the Pay TV (or even just scale it back), join the library instead of buying books, shop second hand, drink filtered tap water…

In fact, once you get into the swing of things, you’ll find ways to save money on just about everything you buy. And those savings will add up big time.

When we first became a one income family, we looked at our budget and thought there was no way we would be able to cut our expenses. Yet we’ve managed to cut them enough so that I don’t have to work and we’ve had a child in the meantime. I honestly can’t believe sometimes, how much we wasted my wage.

Small expenses are easier to deal with

If you’re feeling overwhelmed by the thought of cutting back (where do I start? it’s all to hard? how am I supposed to pay off this huge bill?) then starting small is the answer.

And by small, I mean baby-step small.

‘Groceries’ is too big an expense. Instead, think about how you can save money on bread or toilet paper or breakfast or snacks and each of these small savings will add up to significant grocery savings.

Or, rather than looking at how to save money on electricity, think about saving money on cooking, or boiling the kettle, or heating or when using electronics.

Small savings are easier to deal with (they’ve done psych studies to prove it). And each small saving adds up over the year. Once you’ve gone though every expense in your budget, one small step at a time, you could potentially save thousands of dollars a year (or in our case, a whole wage).

‘…recast larger problems into smaller, less arousing problems, [so you] can identify a series of smaller controllable opportunities of modest size that produce visible results.’ [source via Pop Economics]

And if you need that extra boost (or you like doing these kinds of exercises) keep a record of all the little savings you make and all the times you don’t spend money. You will be surprised just how quickly it all adds up.

Of course, saving money on the small expenses only helps if you don’t rob from Peter to give to Paul. There’s no point not buying that coffee, only to waste money on something else you don’t really want or need (like Mars Bars, I don’t really need Mars Bars. Really, I don’t).

Tomorrow’s article is about how you can super charge these small savings through the magic of compounding.

Have you read these articles?:

1. Gaining Control Of Your Finances. Where To Start. Part One
2. how to save towards multiple savings goals
3. 10 ways to save money today

We’ve all been there before: we’ve sat down with good intentions, drawn up a budget, swore we would stick to it this time. And after a few days, we’ve blown it.

Again.

After years of keeping a budget, I still have budget fails all the time. You would think I would have learned by now.

There are a lot of reasons why a budget fails. It may be unrealistic, it may be too much work to keep up-to-date, it may not be based on your financial goals.

But the main reason that budgets don’t work is because we think they’re magic bullets.

A budget is not a magic bullet.

A budget is a tool. A yard stick. A way of tracking and analysing your finances. A way of measuring your progress evaluating your goals.

Think of it this way: you use a set of scales to weigh yourself. But you don’t think ‘if I just jump on these scales each day, I’ll lose 5 kilos by the end of the month.’ You know that weight loss occurs when you eat healthy food and do exercise; the scales just measure your progress.

So too with a budget: you save money when you spend less than you earn and your budget is a way of measuring your progress.

I’m a huge fan of keeping a budget. I think keeping a record of your finances is an empowering and enlightening exercise. If you’ve never done it, I can promise that you will be surprised by what you discover.

Here are my tips for avoiding a budget fail.

How you can turn a budget fail into a budget success story

1. Know why you keep a budget

Why are you creating a budget, anyway? Are you struggling with debt? Are you saving for specific goals? Do you just want to get a grasp of where your money goes each month?

There is no right or wrong answer here, your reason for creating a budget will be unique to you. It helps to clarify why you want to keep a budget, because you will get little out of budgeting for budgeting’s sake.

2. Make sure your budget reflects the real world

Before you draw up a budget, track your spending for at least one month and base your budget on real numbers, not guess work. What do I mean by tracking your spending? I mean writing down every cent that you (and your partner) spend each day, categorising it and adding it up.

Then draw up an approximate budget based on those very real figures. How much do you really spend on takeaway, for instance? When is your car insurance due? Put it in your budget for that month. Going on a driving holiday in May? Then you need to budget for more petrol expenditure. Try to make your budget as real as possible.

Here’s a little budgeting secret that people don’t often let slip: you can change your budget as much as you like, as often as you like. If it’s not working for you, if your circumstances change, if you underestimated some of your expenses, change your budget. Make it real. Make it reflect your real life. It’s more useful when it does.

3. Identify your ‘bad’ spending habits

At the end of the day, ‘bad’ spending habits is why a budget fails. We don’t save money by writing down what we spend, we save money by not spending it in the first place.

What is a bad spending habit? Something that you’re spending money on that isn’t adding value to your life. The answer is going to be different for everyone and it sometimes takes a little bit of soul searching to come to terms with your spending habits.

What a budget does is help you identify these habits. By tracking every cent you spend, you can pin point with 100% accuracy where your money goes and you can use this information to evaluate whether your spending habits are ‘keepers’ or whether it’s time to ditch them.

4. Identify the underlying reasons for your spending habits

We don’t just spend money, we spend it for a reason. It is important to understand why you spend money on what you do. What do you get out of your purchases?

Do you buy stuff to make yourself feel good? Out of guilt? Out of boredom? Because you think it will make life better in some way? Because you can’t say no to it? Because you really need it? Because you really want it? Because you’re tired? Because you’re unorganised? Because you’ve done your research and it’s a good buy? Because it’s been ages since you spoilt yourself and you just felt like it? Because you feel you should? Because it fills a concept of how life should be? Because of an image you want to portray? Because it’s ethical? Or not ethical? Because you think it will enrich your life? Make life easier? Make you look ten years younger? Ten kilos lighter?

None of these reasons are meant as a judgement. I’ve bought ‘stuff’ because of every one of those reasons. The dusty exercise bike, and the empty pizza box in the garage are a testament to that.

But knowing the reasons underlying your purchases empowers future buying decisions. It means you can put a contingency plan in place to avoid unnecessary purchases. It can give you a heads up on free or cheaper alternatives to get the same result.

5. Work on changing your habits

Once you know what your spending habits are and the ones that you want to change to save some money, work on each habit, one at a time. Your savings will then fall into place.

For instance, if the spending habit you want to change is buying something to eat on the way home from work each day, maybe you can have a snack in the car to munch on instead of buying something. Maybe you can take a different route home from work. After a month of consistently avoiding your old habit, your new habit will be cemented and you will be saving money every week from then on.

You can find more information about changing spending habits into saving habits here.

6. Automate your savings

Yawn. I’ve said it once, I’ve said it a thousand times. Make life easier on yourself by automating your savings and your budget success will take care of itself.

7. Track your progress in your budget

We start and end with our budget. Use your budget to track your spending and measure your progress. It will reflect your spending habits in the real world, the changes you make to your spending, real world inflation, life changes, changes in circumstance, changes in financial goals, set backs, windfalls and progress.

For more information on how to create and keep a budget, track your spending and monitor your progress, you can view the budgeting summary page here.

Have you read these articles?:

1. Saving Happens When We Take Action
2. boost your savings with a regular no spend day
3. achieving your financial goals – 10 strategies for success

This is a guest post by Arnold K of Saving Account Finder.

We all know we should be saving; there is no question about that. However, one of the reasons many of us find it so hard to save is because it takes so long to see results. If we were to go out and spend that money on a new TV, we’d have a new TV to show for our effort, however, when you’re actually trying to save that money for a holiday or a kitchen renovation, your goal can appear so far away there doesn’t seem to be any point in saving.

That is why you need to make your savings work harder for you, to get you to your savings goals sooner. Therefore, implement these 10 practical tips for making the most out of your savings to see real results, remembering that there isn’t one golden rule which will help you reach your golden savings target, but instead you need to develop and implement all of these practices to change your habits and reach your goals with a little time and effort.

1. Term deposit account

A term deposit account is a fixed interest rate account where you can deposit your funds for a chosen amount of time, usually anywhere from one month to five years. During the fixed term that you choose, your savings will be earning interest daily, at the same guaranteed rate every day for the entire term. This means your savings are working harder and growing faster because they’re not falling victim to the official interest rate movements and the return you receive at the end is guaranteed from the beginning.

A term deposit account also helps you make the most out of your savings by restricting your access to your funds. This means you can’t go out and buy that TV when you’re really saving for a home extension, as you can’t access your funds until the end of your term without attracting early access fees. Early access fees will be calculated based on how much longer your fixed term has to run and the original amount invested.

At the end of your chosen term your savings will have grown thanks to the interest calculated daily, and then compounding monthly, quarterly, six monthly or yearly, depending on which interest income structure you have chosen.

2.  High interest savings accounts

High interest savings accounts are dedicated to helping you reach your savings goals by paying you an interest rate on your savings which is much higher than you are getting in your everyday transaction account. A high interest savings account also helps you make the most of your savings because:

• It is fee free so you are not losing any of your savings or interest income.
• Interest is calculated daily and paid monthly, compounding throughout the month.
• It is set up and managed entirely online so you don’t have an ATM or EFTPOS card to withdraw your savings.
• It is linked to your transaction account so you can make easy deposits and withdraw your savings penalty free when you reach your goals.

To make your high interest savings account work even harder for you, use these tips:

1. Pay yourself first. Choose an amount to deposit each week from your income and set up a direct transfer to your high interest savings account. This helps you regularly grow your savings and yet you don’t even notice the transfer being made, and you don’t need to remember to make it.
2. Save any windfalls. If you receive a bonus at work, receive money as a gift or an inheritance or your tax refund comes in, save this money rather than automatically spending it. This money is extra money you weren’t counting on or budgeting for, so you won’t miss it if you save it, and in your high interest savings account it can work harder for you.
3. Save a lump sum for an investment. Term deposit accounts often offer the best interest rates for larger sums of money, therefore, if you can set yourself an investment savings goal to reach with your high interest savings account, and then transfer that amount to a term deposit account, you can earn even more interest.

Tip: feel free to check out our guide on how to save money on our site!

3. Save tax

Most people receive a tax refund at the end of each year, because they have paid more in income tax than they should have, and the tax office is paying them back. However, have you ever stopped to think what the tax office is doing with the money they are withdrawing from your wages all year? Well they are investing that money and earning interest, as well as using it for their own operations, when it could be sitting in your account earning you interest all year.

Therefore, while you don’t want to have to pay the tax office at the end of the year, you can use a tax calculator to work out exactly how much you should be paying, and then adjust your tax withholding with your employer or accountant. You will then have more money in your account each week, which you can invest in your savings or term deposit accounts.

4. Budget

To make sure you are saving effectively and efficiently, you will need to create and stick to a budget. Budgeting can be quite a difficult task for most people because they think they don’t have the time to enter and track their income and expenses. However, once you set up the systems and create a realistic budget that you can stick to over the long term, you will reap the rewards such as:

• Being able to see where you are spending your money and identify where all of your money is going each month.
• Having an accurate picture of your financial situation to build a savings plan.
• Seeing how much you spend on each expense and where you can cut back.

To create a realistic budget which you can stick to which will help you manage your finances and allow you to save more:

• Use a pen and paper, spreadsheet on your computer or app on your phone to record and track your budget.
• Enter all of your bills for the month such as your rent or mortgage, car repayments and phone bill.
• Enter all bill amounts which need to be paid quarterly, six monthly or yearly such as registration, water or insurance.
• Enter all of the things you spend money on throughout the month including food, fuel and entertainment.
• Enter your income amounts, including money from your wages and any other income you receive such as from investments.
• Look at how much money your budget says you should have left at the end of every month. You will probably find that you have a surplus in your budget because you have forgotten to enter all the incidental expenses such as coffee on the way to work and take away dinners. Or you may now be able to see in black and white that you are spending more than you earn.
• Set aside an amount for a regular contribution to your savings account and set up a direct transfer for this amount at the same time.
• Throughout the month keep track of all of your spending and enter it into your budget. Review your budget again and see whether you have a surplus.
• After paying all of your necessary bills and making a contribution to your savings account your other expenses are where you need to look at cutting back if you are living beyond your means. This may mean buying more affordable fresh produce at the supermarket as opposed to expensive packaged meals, or having take away once a month instead of once a week.

5. Reduce debts

You can’t achieve success with your savings plan until you repay your debts because you are likely to be paying more in interest on your debts than you are earning in interest on your savings. To reduce your debts:

• Discuss your situation with your bank or lender and ask them to reduce your interest rates.
• Set up more regular mortgage and debt repayments.
• Pay more than the minimum amounts of your repayments.
• If interest rates go down, continue to make the same repayment amount as any additional repayments will come directly off of your principal.
• Pay off your high interest debts first and then snowball your repayments; once your highest interest debt is repaid, allocate the money you were using to repay that, to repaying your next highest debt and so on.

6. Compound interest

Interest is an important way to make your savings work harder for you, and there are two types of interest used by your bank. The first type is simple interest which is calculated on the principal balance of your savings.

However, the second type of interest is the one which will help you get the most out of your savings, and it is called compound interest. Compound interest is paid on the principal savings balance and the interest earned over the calculation period. For example, if interest is calculated daily and paid monthly, interest compounds each day throughout the month, and is paid into your account in interest income at the end of the month. When you earn interest on your interest your savings grow exponentially without you having to do anything extra.

7. Interest bonuses

Another way to easily make your savings work harder is to choose a high interest savings account which pays interest bonuses. This is additional interest or a higher interest rate, that is paid when you use your account in a certain way. For example, some accounts will pay bonus interest if you:

• Don’t make a withdrawal in a month.
• If you deposit a certain amount each month.
• If you increase your closing balance by a certain amount each month.
• Sign up for an account before a certain date to earn an introductory bonus rate.

8. Offset mortgage

If you do have a debt such as a mortgage but you want to still build up a savings balance, use an offset mortgage account. An offset account is linked to your mortgage and acts as a transaction account where you can keep all of your wages, savings and other income, but access it with an EFTPOS, ATM and credit card when you need it.

However, where a standard savings account earns you interest, an offset account saves you interest. You would be unlikely to find a high interest savings account which pays more interest than you are paying on your home loan, and so having a separate savings account doesn’t make financial sense. Instead, the funds in your offset account directly reduce the amount you pay on your mortgage. For example, if your mortgage is $250,000 and you have $10,000 in your offset account, you only pay interest on a mortgage of $240,000.

Plus, because you are only taxed on interest earned, not on interest saved you don’t lose any of your interest benefits in tax as you would with a high interest savings account.

Savings Account Finder

Savings Account Finder helps you compare savings accounts and term deposit products in Australia, to help you achieve financial independence and responsibility.

PS. I’ve been doing some blog theme upgrades, so apologies for all of the temporary rubbish posts in the RSS feed.

Have you read these articles?:

1. creating a savings plan and reaching your savings goals
2. taking your small savings and making them bigger
3. how to give your savings plan a quick boost

The other day a reader asked about keeping track of multiple savings goals:

This is a good question and it follows on nicely from the last two articles regarding savings goals. Most of us have multiple savings goals, all with different ‘due’ dates. Some savings goals are ‘rolling goals’ like a clothing budget, a Christmas fund, car registration and other bills. This means that if you withdraw some cash to cover new work clothes, you still want to keep saving for future purchases.

I’m a huge fan of writing things down and keeping records. There are too many things to think about without trying to worry about whether you can pay the electricity bill or whether you have saved enough for your next holiday.

Rather than dealing with ‘maybe’, ‘might’ and ‘possibly’, by keeping financial records (aka a budget) you have cold hard data from which you can easily evaluate your progress towards your savings goals.

Below is the method I use for keeping track of multiple savings goals.

1. Have a savings account dedicated to savings

Use a savings account that is separate from your everyday account and that earns you high interest. When saving for multiple goals with different end dates, you want an account that doesn’t charge fees or penalise you for withdrawing money when you need to.

2. Write down each of your goals

The best way to keep track of each of your goals and your progress towards reaching those goals is to write them down. I like to use Excel to keep track of my savings goals, but you can do the same exercise on a piece of paper or in an exercise book.

First write out a list of your goals, the date each one is ‘due’ and the amount that you need to save for each goal.

Next divide the amount you need to save up into pay periods (monthly, fortnightly or weekly – whichever suits you best). This is how much you need to save for each goal to reach your target on time. For example:

You can have as many savings goals as you like, although the more you have, the longer it takes to save for your goals.

TIP: I like to put a little visual reminder in my spreadsheet of when each goal is due (anything to make things easier). I do this by putting a small star (Insert: Shape) in the month that I need to have saved by. I do this especially for large bills like rates and car registration.

If you prefer to use an exercise book (which is what I did before I fell in love with Excel) put each savings goal on a separate page and have a summary page for the total amount in your savings account. Draw up three columns on each page to write down amounts as you deposit them into your account, to write down ‘withdrawals’ and to keep a running total. Depending on your savings timeframe, you may need to leave several pages per goal. For example:

3. Calculate how much you need to save each period

In the first example above, I would need to put aside $534 each month to reach both savings goals ($417 for the holiday + $117 for the washing machine).

So to reach your savings goals, you physically deposit your $534 into your savings (bank) account and you write it up in your savings book or spreadsheet as separate amounts (the $417 and $117) for each goal.

What happens if you need to save more than you are able? You have three options:

1. cut back on expenses in order to boost your savings; and / or
2. earn more money; or if both of those options aren’t practical
3. prioritise your savings goals and save for those that are most urgent or most important first

As far as the third option is concerned, just say I can only save $450 a month and that I feel the washing machine will probably last a few more months than I predict. In that case, I would put the $417 towards the holiday and the remaining $33 towards the washing machine.

Remember, you can have a lot of savings goals, but you can only save as much as your circumstances allow.

4. Automate your savings

Once you know how much you need to save in total towards each savings goal, automate it. Use your online banking facility to schedule the deposit after each time you get paid.

There are two reasons why automating your savings is important. The first is that you don’t spend or miss what you don’t see, which keeps you on track, even if your motivation wavers.

The second is that while you may have good intentions to save money, expenses can just ‘pop up’ and it is easy to spend everything in your account. By paying yourself first, you are forced to spend within the limitations of what remains.

5. Use the total balance to reconcile

When you’re tracking multiple goals, it is the balance of each goal that is important not the total balance in your savings account. So to labour the point, track the progress of each goal not the bank balance.

However, you will want to reconcile your written records with what you actually have in your bank account and you do this with the total balance.

Either using excel or on paper, add up the total balance of each savings goal. This total should equal your bank account balance. So in the example above, the total saved so far for both goals is $1,218. This should be equal to the balance on your bank statement.

6. Recalculate when new goals arise or old ones are met

Each time you reach a goal or new goals arise, you will need to calculate the total amount you need to save each period (monthly in the above example).

So for our example, once we have saved for the washing machine, we only need to put aside $417 each month to reach our only goal, the holiday.

Then if we have a new goal of saving for a deposit on a home, and we calculate that we need to save $200 a month, then our new monthly amount is $617.

Once we have calculated the new amount, we then need to change the schedule with the bank and automate the $617.

The key to keeping track of multiple goals is to keep a written record of your goals and focus on the balance of each goal, rather than the total balance of your bank account.

How do you keep track of your savings goals?

Have you read these articles?:

1. creating a savings plan and reaching your savings goals
2. tutorial: tracking your savings goals using excel
3. snowballing your savings