4 key benefits to saving money for the future

3 mins read

How saving today will brighten your financial future

Think of your savings plan as a roadmap to help you reach a specific financial goal. You may have a major purchase in mind or want to establish a financial contingency plan in the event of unforeseen expenses. Either way, knowing you have the choice of using part of your savings rather than incurring unexpected debt will mean less financial stress.  

When you’re ready to create a savings plan, consider using a well-established budget approach that has been tried and tested over the years, such as the 50-30-20 method. Whatever approach you take, having a savings plan in place has many positive benefits to help you achieve a brighter financial future. Here are four of our favourites:

 

1. Being prepared for irregular expenses

Just when you thought your finances were nicely on track, along comes a surprise expense that throws you off balance. Unexpected, irregular expenses can potentially create a financial headache if you don’t have a pool of savings to draw from. One way to avoid the stress of unanticipated expenses is to set up a sinking fund with a buffer which can be used to cover both planned and unplanned expenses. 

By categorising your transactions, Humaniti can help you understand your expenses in detail so you can discover areas of potential cost saving. One example is our subscription feature which helps to identify recurring payments for publications or entertainment services. You may decide to cancel one or two subscriptions and make some substantial cuts to your regular spending. Small, recurring payments add up to a surprising amount over a 12-month period. 

2. Funding major purchases

Savings plans are most commonly used to cover the cost of large purchases that would otherwise require taking out a loan. The obvious financial benefit is that by avoiding a personal loan, you also avoid paying significant amounts of interest. 

One common major purchase is buying a new car. If you think well ahead and set up a savings plan, you will have time to accumulate the necessary funds. With enough lead time, you may also be able to invest some of your savings short term and earn additional interest. You may even be able to negotiate a better deal by having the cash on hand. Even if you don’t save quite enough to purchase your dream car outright, having a substantially reduced personal loan will mean less interest to pay.

Humaniti can help by providing a clear view of your current financial position to ensure you’re on track with your savings plan and goals as well as understand the bigger picture of your personal finances. Our simple dashboard provides a 360° view of your financial situation which means if you stick to your financial plan, you can watch your savings grow, your debts reduce and your overall net worth increase. 

3. Boosting your retirement savings

A savings plan can help fund your superannuation and contribute to a more comfortable lifestyle in retirement. From time to time, you may consider supplementing your superannuation balance by making additional contributions, and there may be tax benefits for doing so. Start early in planning for a comfortable retirement and you will see a significant impact on the amount of funds you can accumulate over your working life.

By linking your superannuation account to Humaniti, you will gain insights into how your super balance compares to other Australians like you. By keeping a closer eye on your super balance and how it compares, you can decide if allocating additional savings to your superannuation is an appropriate financial decision for your circumstances.

4. Saving for your future home

When you buy a home you will need to make a significant payment up front as a deposit. If you have saved enough funds to cover the deposit, you will reduce the amount you need to borrow and may qualify for lower interest rates. A smaller mortgage will mean less interest over the term of your loan, and you will start your home ownership journey with more equity in your home.

When you securely link your transactional and savings accounts to the Humaniti personal finance app, you will better understand your spending and have a clear view of your savings over time. In addition, if you own a home and have a separate mortgage account which is also linked to Humaniti, you will have an accurate and up-to-date view of your overall net worth. 

There are many upsides to having a savings plan in place, and with your accounts linked to Humaniti, you will be able to track your financial activity against your savings plan. Humaniti will automatically categorise your transactions and provide a 360° view of your finances to help you manage your money 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 most important step on the path to financial security is creating a budget. Put simply, a budget is a spending plan that will help you live financially within your means. It will put your income to work by allocating what you earn to expenses and savings. 

Most of us think we know where our money is going, but creating a budget takes out the guesswork.  Here are the top five reasons why you should start budgeting today.

 

1. Budgeting helps you manage and minimise debt

When you prepare a budget, allocate a portion of your income to finance the expenses you know are coming so you don’t take on new debt. You may also want to put some of your income to savings which can help you pay off any existing debt. One popular budgeting method is the 50-30-20 approach where 50% of your after-tax income is allocated to needs, 30% to wants, and 20% to savings. When you have the balance right you will start to see both your debt and your savings in better shape.

 

2. Budgeting helps prepare you for emergencies

With an appropriate budgeting plan, you can aim to contribute a certain portion of your income each month towards your emergency fund. In the event of a crisis, having enough money to cover your living expenses for three to six months will help keep you financially sound. Creating a budget and sticking to it will help you bolster your finances for unexpected situations. 

 

3. Budgeting helps you be more disciplined with your spending

It is often said that if you don’t track something, you can’t measure it – and the same is true with our spending. A budget helps you focus on how much you’re spending and in which areas. When you know your budget limits, you will be more disciplined at times when you are tempted to splurge. You may also discover ways to reduce outgoings each month which can bring you closer to achieving your financial goals.

 

4. Budgeting helps build your retirement savings

With your budget in place, you may choose to invest some of the extra funds you are saving into a longer term goal such as superannuation. The bigger your nest egg, the more likely you will enjoy a comfortable lifestyle during your retirement. When you contribute additional 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

Whatever your financial goals, your best chance of achieving them is by closely following your budget. Month by month you will see the savings build and before you know it you will have the necessary funds for that overseas holiday, the new car you’ve been dreaming about, or a solid starting point to fund your children’s education. A budget is simply a plan to achieve a brighter financial future and when you stick to the plan, the benefits will come. 

 

Conclusion

At Humaniti, we want to help you create a plan to get a handle on your spending and achieve your financial goals. Your financial health will see a significant improvement once you set a budget and stick to it. Humaniti’s personal finance and budgeting app can help with that first important step of budget planning as well as the ability to easily track where your money is going each month.

 

 

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