The Mindset to Save Big

Low deposits and lack of finance is one of the biggest obstacles we hear from our clients everyday. Here are a few quick tips we have tried and tested ourselves to save large amounts in a short span of time.

Most people will tell you that to save money, you need to cut down on the barista made coffee, only eat noodles and wear out that old shirt till it has holes in them. These are all great ideas but they never helped me save to the level I needed to reach my investment goals. If anything, it just made me feel low, tired and demotivated.

That is when we decided to leave playing a defensive saving game and operate at a larger scale. Play the offensive, goal scoring position in this saving game and tackle the obstacles head on.

Own A Goal

The first step is to set a goal. There are just 2 things you need: the dollar amount you need to save and an end date by when you should have saved this amount. Do not reduce the amount or extend the time if the goal seems unreasonable. The tips below will help you get there.

Next write the goal down along with your 'why'. You can visualise your 'why' by pasting relevant pictures that keep you motivated: these can be pictures of your family, your dream home, your dream travel destination or a charity you are saving for. If pictures aren't enough, then write motivational quotes, watch motivational videos or listen to songs that give you the energy to keep going. You need to take big action to save big. Big actions require big effort and sacrifices, and you need an even bigger reason (your why) and bigger motivation to avoid giving up.

Feed the Goal First....and the most

We follow a rule of saving 35% of our household income. That is 35% of the pre-tax amount saved in a sacred account which is only used towards our investment goals. If you can do better than 35%, then that is most excellent. However, you may want to rethink if you can't even save at least 30% of your household income.

Why we chose 35%? Well the top tax rate in NZ is 33%, and that gets bumped up slightly if we include ACC deductions. So why should the government take a bigger share of my income than my own goals - my desires, my happiness, my purpose. 35% is a nice round number, that (a) pushes us out of our comfort zone, (b) helps us get to our savings goals quicker and (c) ensures we are definitely paying the goal more than anything else - including taxes!!!

After paying around 30% in taxes and 35% towards the goal, we only had about 35% to spend on living. And that got chewed up pretty quickly in insurances, mortgages, groceries, vehicle expenses and utilities. We soon realised that this is getting too difficult and it gets really tempting to reduce the 35% savings target. If you are getting tempted as well, then read the blog from the top again. Go through your 'why' over and over again and then ask yourself, "what if the government increased the tax rate?". Most likely you will just pay the higher tax and find a way to fund your living expenses. So why treat your goals any different or inferior to taxes? You can't pay less tax, then why compromise your savings target? If your concern is not having enough cash leftover for living expenses, then the answer is in the paragraph below.

Increase Your Income

If you can't pay taxes, save towards your goal and meet your living expenses simultaneously, then the best solution is to increase your income. I mean, yes, you can cut living expenses further but that only gets you so far. The biggest factor in achieving your savings goal and meeting living expenses is income.

How to increase income? Well there are hundreds of ways if you put your mind to it. But here are a few common ways to consider. Can you get paid more for your day job? Can you get a raise? Can you get a higher paying job? Can you do extra hours at work? Can you get a second job or get a side gig? Can you invest your existing savings to earn a higher return on it?

Putting in more hours working will not just increase your income, it will also save you from making unnecessary expenses. Just look at your spending patterns, we all spend more on leave days than on working days.

Plan Your Spending

If you fail to plan, then plan to fail. This is an old saying which is very relevant for your savings goal. Plan your spending out to the next 3 - 6 months. Focus on the big ticket items and start looking for deals to buy those. Nothing can throw you off the target than a surprise bill or expenditure. So what can you do? Reduce the surprise element as much as possible. If you are going for a vacation at the end of the year, start looking for hotel deals now. If you have a a big event coming, start looking for specials and sales now. Failing to plan your spending will either force you to spend more during a rushed, last minute purchase or compromise on quality to keep within budget.

Who Pays for My Stuff?

The biggest mindset change for us was to realise that money is limitless in this world. According to Aunty Google, there are some $300-$400 trillion of wealth in the world. So if you want to spend on things beyond your means, then don't ever say "I can't have it". Instead say "how can I have it?" and "Who will pay for it?".

Now I don't mean someone paying for your items at the counter, although that won't be too bad. I mean identifying the people with money and what things can you do for them to earn that. The payer could be a new client who will pay you for your service, your boss paying you a bonus for your efforts, the boarder paying for a spare bedroom or the bank paying you interest for keeping a term deposit with them. The payers are limitless and you just need to find what good or service of value you can give them.

Celebrate Success

The last thing, and I am guilty of not strictly following this is to reward yourself for achieving milestones along the way. The process and progress towards saving is a positive step towards your financial health and actions to improve your savings should result in rewards, otherwise you will see this whole thing as a depriving punishment.

Small things we do is allocate a small portion of the additional income towards a leisure activity, or use part of the surplus from our monthly target to go for an outing. Nothing too fancy, but enough to feel the incentive to destroy those monthly savings targets. Another good way is, say you budgeted $100 to buy something and you managed to find a deal for $60, then you can use part of the remaining $40 to reward yourself for finding the deal. A few of these is all you need to begin with. Before you know it, your whole mindset will change and you will start looking for deals to get rewarded. Humans love to impress and get rewarded, even if it is to impress your own self.

The biggest difference we found between being able to save and being able to save BIG, was our mindset - setting big goals and taking even bigger actions. Feel free to share your saving tips in the comments section or message me if you need help with your savings goals.

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