Saving is hard work. Even those fortunate enough to have a trust fund or inheritance waiting, good financial management is an inevitable part of life for everyone. The reality is, if you can’t get a system in place that works for you, it’s going to be really tough to get ahead. When my wife and I started out, despite being overwhelmed, our key consideration was ensuring we could maintain a balance between putting money aside and enjoying our life. You might be thinking that saving doesn’t create wealth, so think of this as an opportunity to invest more of what you make.

Our wedding was the best day of my life. Seeing my stunning wife walking down the isle was a moment I’ll never forget. Weddings are a bloody expensive undertaking, and left us with very little savings. Over the course of a couple of years we went from $10k in savings to over $100k in our saving account, all while managing a honeymoon, some international travel and an active social life.

Disclaimer: I am not an accountant, financial advisor, CPA, CA or any other form of financial expert. I’m a common guy that has struggled with money and wants to share what has worked for me. It’s important that you get independent financial advice when making decisions regarding your specific needs.

CommonTom, 2020.

Now that we’ve got that out of the way, here are the elements that helped my wife and I put away $100k in savings in under five years, without sacrificing our lifestyle.

Start with a goal.

It doesn’t matter what the goal is – but have a goal in your mind and write it down. Studies have shown that people who can vividly describe or picture their goals are 1.2 to 1.4 times more likely to successfully accomplish their goals. You might want to save for a home, a new playstation, or you just like the idea of having a specific amount available. Whatever the goal is, write it down and attribute a figure to it.

For us, we wanted to save for a home deposit and $100k had a nice ring to it.

Chunk it down.

Even for the smallest goals, I find it easier to break down my saving goal to bite-sizes amounts. This creates less daunting figures, and more confidence in my ability to achieve it. For me, it was easier to take split $100k into ten $10k allotments. Attached to these allotments were rough time frames for achievement.

Based on our income and expenses at the time, I knew that we could realistically save about $2.5k per month. The astute mathematicians out there might have noticed that if we achieved this every month, we should have $120k in our savings by now – if this process taught me anything, it’s that saving is hard and you’ll have setbacks along the way, so breaking a big goal in smaller allotments helps when navigating some of these more difficult periods!

Know your expenses (and automate them).

The key to a good savings plan is knowing your recurring expenses. Power bills, phone bills, average grocery spend are all relatively fixed amounts. By knowing these fixed expenses you can understand how much money is left over each month for incidental expenses and saving (and therefore how long you need to reach your savings goal). Now, some of these expenses can be reduced, but for now we’re only interested in understanding what these expenses are, and creating a plan to pay for these.

Once you know what your recurring expenses are, create a bank account that is for the sole purpose of paying bills – the Barefoot Investor has a great article on setting up your ‘buckets’. From here, you can automate your regular payments and have enough available money for your weekly groceries and other recurring expenses.

Don’t forget to pay yourself.

For me, this is the most important part of achieving your savings goals because we still need to live, right?

It can be great to see your saving account grow by the month and reach that saving goal, but at CommonTom we believe that a balanced lifestyle is the best way to find happiness, so giving yourself a little spending money is a great way to make sure you don’t isolate yourself while saving for your goal (hello, COVID-19).

We love a coffee, a couple of gins, travelling to new places and a glass of wine (or two) – not necessarily in that order or exclusive of each other. We also enjoy a lazy summer afternoon in a beer garden and the occasional Uber Eats. We don’t want to deprive ourselves of these moments or put our life on hold while we build our savings, so it was important to make sure we were putting aside money that we could spend without any feelings of guilt. The Barefooters’ out there will know this as the splurge bucket – and it should be about 10% of your total monthly income.

Align it to your pay cycle.

If you’re a consultant or freelancer, this one might be a little tougher, but if you’re earning a regular paycheck, even as a casual, knowing how much you want to put aside each paycheck is a great way to automate your savings. Because you’re going to automate your recurring expenses, and you’re putting 10% into a splurge account to spend on the fun stuff, aligning your saving to your pay cycle is a great way to put your savings on auto-pilot.

We found the easiest way to do this was to set up automated transactions into our accounts. Our monthly wages were paid into a central everyday spending account – we used this for our expenses. We then sent 10% of our income to another everyday spending account – we used this for our splurge.

The remainder of our money was sent into two offset accounts. We used our offset accounts because they were a safe way to hold money and reduced the interest on our mortgage. If you don’t have a mortgage, there are many low-fee interest saver accounts you might want to use (or an investing account). We would send 30% of our monthly income to our Home Deposit offset account and 10% of our monthly income the secondary offset account. This left 50% of our monthly income in our expense account to pay off our recurring bills.

You may need more or less complexity – whatever works for your circumstances is perfect. The main thing is taking the manual process out of it so that you can relax with the peace of mind that your money is going where it needs to.

Make it memorable.

If you’re familiar with learning styles, you’ll know that people retain information in different ways. I’m not going in to learning styles in this post, but if you don’t know what works for you, I suggest trying a few different approach here.

While my wife and I have different learning styles, we’ve found that drawing our goals out made it memorable (pro-tip: add another layer of fun by grabbing a glass of while and a cheese platter). For some people it’s creating a social post to share with the world, while others may create a spreadsheet or leaving yourself a voice memo – however you find your inspiration is really us to you. Now, I don’t have an artistic bone in my body, but drawing our concepts was a fun way to visualise what we wanted to achieve.

Celebrate the milestones.

I link this one with paying yourself – it’s important to celebrate small milestones when you’ve got a big savings goal ahead of you. We mentioned earlier that chunking it down is a great way to make goal more attainable, and you can use these to align your milestone if you wish. For us, it made more sense to have a little more substantial milestones, so we set out 4 main milestones on our journey at $25k intervals.

“Treat Yo Self!“

Tom Haverford & Donna Meagle, Parks and Recreation.

Now, I’m not saying that you should go out and blow half your savings celebrating the milestones – I mean, don’t drop $500 on a Saturday night with the boys. But, make sure you celebrate the wins along the way, because if we’ve learnt anything, saving is hard work. When you knock over one of your milestone, grab someone special and head out for a nice dinner or grab that more expensive bottle of red wine and settle in for a movie night – how you celebrate is your choice.

Disclaimer
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