Did you know Australia has the highest household debt to income ratio in the world? Yes, that’s right. Australia is even higher than the United States with a total of a whopping $49.3 billion in credit card debt alone! So how do we correct this issue that is so rampant throughout Australian households? We correct this issue through saving our money and using it for the things we need rather than the things we want. If this is starting to sound like a boring university finance class let me explain that saving money can be fun and addictive if you know how to make the process enjoyable.
Savings does not have to be a chore and it surely does not have to be something that strangles you from living the life you want. Saving money can be one of the most rewarding experiences you could ever do if you know how to do it the right way. That is exactly what you are going to learn today. I have discovered an easy to follow formula that will make saving money fun and addictive for anyone who puts the principles into action. Let me first explain that it will take a small amount of planning up front and a bit of imagination. You will need to look a few a years into your future and write down the life you want to be living and the things you want to have to really make this work.
Without any delay, let’s go over the formula for making saving money fun and addictive. Step one is that you need to discover exactly why you want to save money in the first place. Oh yeah, I know everyone has been telling you since you were a young little person that you need to save money for a rainy day, but that way of thinking is not going to get anyone excited about saving money. First, who wants to save for a rainy day? And second, who wants to listen to people who probably are not saving money themselves?
Step 1: Figuring Out Your Reason For Saving
So step one is to take the time to really find out why you want to save money. Maybe you want to buy a house in the next five years or maybe you want to retire in a beachfront house. Maybe you want to put your children through college or maybe you just want the secure feeling of having money in the bank! Whatever your reason is for saving money, you need to write it down. Having a purpose for doing something is the start of taking consistent action. Having the reason you want to save money written down is the start of you being able to consistently save money.
Step 2: Evaluating Your Financial Condition
Step two requires you to take a good look in the mirror and evaluate your current financial condition. How much can you start saving every day while still being able to buy the things you really need to survive? A great start to an effective savings plan is 10% of your income. If you can still pay for all living essentials while savings 10% of your income than write down that as your goal. If 10% is too much for you save than it is absolutely fine to start with less. You can even start saving money by skipping that $2 coffee every morning! Whatever the amount or percent of your income is that you can save you need to write it down and make the commitment for the next 90 days to save that amount of money each day. After 90 days you can reevaluate your circumstances and increase the amount you save if possible.
Step 3: Tracking and Watching Your Money Grow
Step three is where the fun begins and saving money starts to become addictive. Up until now you have figured out your purpose for saving money and you have made a commitment to save a certain amount each day. Step three involves tracking and watching your money grow! You need to keep a journal of your savings either on paper or on your computer that you can track each day. Consider using a budgeting spreadsheet.
Every day you will add that days additional savings to your total amount and watch the number grow and grow. This may not seem very interesting the first week or so but I can assure you that you will soon become very addicted to checking and adding money to your savings record.
It is so thrilling to watch what may have started out as only $2 per day turn into hundreds and then thousands of dollars!
Step 4: Transforming Your Habit
Step four is essential to transforming the habit of savings money into a fun and addictive experience. Step four is that you can pay yourself small rewards for your effort. The idea is to set up bench marks where you reward yourself for reaching that level of savings! For example, your bench mark could be that for every $1,000 you save, you can treat yourself to one night out at an expensive restaurant. Or your bench mark could be that for every $100 you save, you can treat yourself to one latte at Starbucks. As your money grows your benchmark could be that for every $500,000 you save, you can treat yourself to one new car!
These small rewards in comparison to the dedication you have made to your savings plan will feel like a pat on the back to encourage you to keep going. They will keep the habit of saving money fun and addictive and they will strengthen your commitment to continue to save money. The real joy will come when you are able to fulfill your ultimate purpose for saving the money in the first place. If you saved the money to put your children through college when that day comes you will have find yourself with a sense of inner strength and peace that you never experienced before. You will feel accomplishment and success. The more of these experiences you have the more addictive and fun saving money will become.