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Smart spending

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Smartening up your spending activity needn’t be a hassle if you follow a few simple savings strategies


With interest rates now at their lowest level since April 2010, it may be tempting to spend your extra cash. However, failing to look to the future can cost you over the longer term.

Both in Australia and overseas, economic uncertainty remains at very high levels.

Very few financial commentators are willing to predict which way interest rates will move next – let alone predict how the banks will react to any changes.

In this sort of environment, the word ‘budget’ should be front of mind for every Australian household.

Here are a few simple strategies to ensure you keep your spending in check.

Counting the costs The only way to rein in your finances is to know exactly where you are spending your hard-earned cash.

Take some time to map out what percentage of your income is spent on leisurely and ‘impulse’ spending and compare this with your essential costs.

This simple exercise will allow you to calculate how much of your income is going to waste, making it easier to adjust accordingly. Weekly allowance With a greater understanding of where your money is going, you are now in a better position to set yourself a weekly allowance.

This allowance should be spent purely on life’s pleasures and be considered as your ‘disposable income’.

Be sure to keep track of where your money is going and resist the temptation to go above and beyond your allowance.

Start a piggy bank It may sound obvious, but saving is the best way to improve your financial position.

One way to do this is to set up a high interest savings account and create direct debit payments that operate on a monthly basis.

How much you choose to save is totally up to you, but 10 per cent of your salary is considered a good place to start. You will hardly notice any change in your financial situation, but you will find yourself getting into the savings groove. Cut the credit Ditching the credit card is the most effective way to drive down your debt.

Credit cards typically involve a higher interest rate and can cost you thousands annually.

If it is a pricy item that you are looking to buy, be patient and save.

While it may take a little longer to acquire the necessary funds, the money you will save in interest repayments will certainly be worth the wait.

Increase your mortgage repayments Upping your monthly mortgage repayments can save you thousands of dollars over the life of the loan.

Moreover, the more cash you put towards your home, the faster you’ll be able to unlock equity to use for other projects or investments.

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