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.