American actor Will Rogers once said, “Too many people spend money they earned, to buy things they don't want, to impress people that they don't like”. Unsurprisingly, it is most often those with more financial wealth who create a larger expenditure and fall into the trap of making unobtainable spending decisions. Those with less wealth learn how to budget their money in smart ways as they have no other option but to live a financially sustainable lifestyle.
Savings does not always translate to putting a set amount of money aside per week for future uses, be that a home, retirement or other financial investments. Savings can also include the simple things such as reigning in utility bills, watching expenditure on groceries, clothes, eating out and other mindless transactions that are more of a want than a need.
Through our own review of people’s cash flow management, we have noticed majority of people’s expenditure habits comes down to two key areas; Groceries and eating out. Simple savings habits can be used to cut down on over expenditure, especially in these discretionary areas.
When it comes to saving on groceries, simple budgeting steps can include making a list of groceries you need and buying only what has been written down, planning weekly meals in advance, taking cash with you to put a limit on your spending and if you have children, asking someone to mind them so you can take your time and not succumb to pestering.
Eating out can be maintained by limiting the amount of times you go out to eat per week, replacing expensive drink options for water and avoiding the dessert menu and going elsewhere for a cheaper alternative.
Taking time out of your busy schedule to review your spending can help significantly with acknowledging your spending trends and making the appropriate decisions to cut back and save.
The power of setting up a spending plan is overlooked by many, as they receive a steady and substantial income which caters to their current wants and needs, but these spending habits do not factor in future inevitable circumstances (such as retirement) or a risk of unforeseen circumstances (such as an illness or accident). Creating a plan is the first step in the process to maintaining a steady cash flow management routine that will assist you in future circumstances or endeavors.
We recommend that all working individuals should be saving a minimum of 20% of their incomes, with 12-15% of this going towards a retirement savings and the other 5-8% going towards an emergency fund or other long-term savings. Every few months it can be smart to set a time to budget for all long and short-term goals (i.e. Retirement, holidays, a new car or a home etc.). Include in this how much you need to save and by when to figure out a rough idea of how much you need to be putting aside per week or month to achieve these goals in the time objective. If your income does not allow you to comfortably put this money aside into a savings, then it may be time to look deeper into your spending habits or make realistic adjustments to each goal.
Looking at different saving trends or styles- such as Barefoot Investor, can also offer a new insight into saving techniques or habits to get yourself on top of your cash flow management.
Financial Architects offers the opportunity for you to have a comprehensive well-designed cash flow plan to help you enhance your lifestyle options both now and in your future. Using a cloud-based software, we can help you map out your day to day spending and assess the areas where overspending is most frequent.
If a comprehensive cash flow management plan sounds suited for your current budgeting needs, book an introductory appointment with one of our Authorised financial advisers and begin your journey on a successful Financial Management path.