Benefits of a savings plan

3 mins read

4 key benefits to saving money for the future

A savings plan is a roadmap to save and invest money to reach your specific financial goal.  Depending on your objectives, there are many benefits to a savings plan. You can consider following well a established and tested approach to saving and budgeting, like the 50-30-20 method, or come up with an approach that is suitable to you. Whatever approach you follow, establishing a savings plan can help you achieve a brighter financial future. Below are 4 key benefits to a savings plan in place and some tips on how Humaniti can help.

 

1. Be more prepared for irregular expenses

You can create a savings plan to fund your irregular or one-off expenses. Irregular expenses can spring up at any time, leaving you in a financial predicament if you haven’t planned for the unexpected. One common way to save for irregular expenses is to set up a sinking fund. You could use your sinking fund to cover planned expenses as well as some extra buffer for unplanned expenses. Any additional savings you add to your sinking fund can enable you to tackle unplanned expenses without a major dint to your financial plans.

 

2. Fund your big purchases

Savings plans are most commonly used to fund large purchases that would otherwise require getting a loan. You can save significant amounts on the interest you would otherwise incur, when you fund your large purchases using your savings instead of loans. Taking on a loan can be costly, and you also need to maintain a good credit score for most financial institutions to approve your loan.

As a practical example – consider if you expect you’ll need to buy a new car in 3 years. You can start saving today to accumulate the expected cost of purchase. When invested wisely, your savings will earn interest. As such, you can grow your savings and beat the impact of inflation, while benefiting from the magic of compound interest returns as well. With savings at hand, when you’re ready to make a purchase, you may be able to negotiate a lower cash price for your car.

  • Humaniti can help by providing a view of your net worth. With a simple dashboard to get a 360° view of your finances, it will be easier to ensure you’re on track with your savings plan and goals, while also understanding the bigger picture of your personal finances.

 

3. Fund your retirement savings account

With a savings plan, you can fund your superannuation to be more comfortable during your retirement.  You can consider doing this by supplementing your super with additional contributions. There may also be tax benefits for doing so.  Planning for a comfortable retirement  as early as possible can make a huge impact on the amount of money you will accumulate at the time of retirement.

  • By linking your superannuation account to Humaniti, you’ll get rich insights on how your super balance compares to other Australians like you. By keeping a closer eye on your super and how you compare, you can decide whether allocating additional savings to your superannuation is appropriate to you.

 

4. Pay for the down payment of your house

Buying a home requires a significant down payment. By saving enough money to cover the down payment, you can qualify for better interest rates on your mortgage while maintaining some equity in your home.

  • Humaniti allows you to link both transactional and savings accounts. This helps you to better understand your spending, while also having a clear view of your savings over time. In addition, if you own a home and have a separate mortgage account, you can link your account and add your property, so that you have a clearer and up-to-date view of your net worth.

 

Conclusion

There are many benefits to a savings plan. Humaniti can help you understand how you are tracking against your savings plan. When you link your accounts, we automatically categorise your transactions for you, so you can better understand your spending and learn where you can save. The 360° view of your finances can help you manage your finances, budget better, and build a brighter financial future.

 

* Disclaimer – the information in this post is general only and does not constitute financial advice. 

Why budgeting is important

2 mins read

Top 5 reasons why personal budget planning is important

The road to financial security often starts by taking the time to sit down and create a budget. A budget puts your income to work by strategically allocating money to expenses and savings. In other words, a budget is a spending plan that will enable you to live within your means. At the same time, budgeting can be a powerful way to help you save enough money to achieve your long-term financial goals.

 

In this post, we discuss five reasons why budgeting is important, and why you should start budgeting to make the best use of your available income.

 

1. Budgeting helps you manage and minimise debt

Budgeting helps prevent the accumulation of new debt. By strategically allocating your income you can lower your debt. When you prepare a budget, you aim to allocate a portion of your income to finance your expected expenses, without taking on new debt. In addition, budgeting helps you focus on saving money each month. By doing so, you will be able to pay off your existing debt if you have any. The 50-30-20 approach is a popular budgeting method, but there are many others too.

 

2. You’ll be more prepared for emergencies

With an appropriate budgeting plan, each month you can aim to contribute a certain portion of your income towards your emergency fund. Most experts suggest that to ensure that you stay financially sound during a crisis, your emergency fund must have enough money to provide for your living expenses for three to six months. When you create a budget and stick to it, you can prepare for unplanned emergencies in a better way.

 

3. Budgeting helps you be more disciplined with your spending

When you create a budget, you keep a close watch on your spending to identify the areas of improvement and where you can lower your expenses. When shopping, you will be inclined to follow the spending limits specified by you in your budget. This can help you to be more  disciplined with your spending and keep you on track to achieving your financial goals.

 

4. You can build your retirement savings

When you follow your budget, every dollar you save will contribute towards achieving your financial goals. For example, after allocating your savings to emergency and sinking funds (for any major upcoming expenses), you can elect to invest any remaining portion of your savings to your superannuation fund. This can help ensure you’ll be more comfortable during your retirement. By contributing a certain amount of money each month to your super fund on top of your employer’s contribution, you can supplement your retirement income.

 

5. Budgeting helps you achieve your financial goals

By closely following your budget, you can achieve your financial goals. Whether you want to buy a car or finance your child’s education, you can tailor your budget accordingly to achieve your desired savings amount each month. Budgeting is by no means a golden egg, but a clear plan is half the battle.

 

Conclusion

Budgeting can give you complete control over your finances and help you devise a plan to achieve your financial objectives. Your financial health can markedly improve once you make a budget and stick to it. If you don’t have a budget, take the first step and improve your financial condition by discovering how Humaniti’s personal finance and budgeting app can help you build a brighter financial future.  

 

 

* Disclaimer – the information in this post is general only and does not constitute financial advice.