Creating positive saving habits isn’t always easy, but John Liston, Chairman of Liston Newton Advisory here on the GC, is here to ‘save’ the day with some effortless hacks and tricks. John also shares with us some methods to stay motivated on our saving journey and finding the right balance to suit our lifestyles.
What are some easy ways to save outside of the traditional methods we often hear about?
Over the years, I’ve found that the easiest way to save is to “pay yourself first”. If you set up an automatic direct debit into your savings account for a certain amount, so as soon as you receive your paycheck it gets taken away, you will effortlessly adjust your spendings.
I also suggest doing a budget first with all the expenses that you have and that you want to have (entertainment, clothes, dinners, wine) and confirm how much you are comfortable spending. Then I usually reduce this amount by a 20 per cent margin (to give me a bit of leeway) and that is the amount that I automatically direct debit out of my cheque account into my investment account.
Can we still splurge on the little things in life, or is it really about giving up that latte and avocado toast?
I don’t think you will stick to something if you are being forced to do it – you have to enjoy it. I personally enjoy looking at my investment account once a month and seeing it go up (hopefully!). Then, the coffees I didn’t drink and the wines I didn’t have made it all worth it.
Nevertheless, I do like going out for dinner several times per week, as a lifestyle choice. I think it’s important to create a wishful budget and include all the lifestyle expenses that you wish to have. In addition, you can also be smart and find opportunities to save on cash.
I also suggest people use some of their free time to find side hustles and increase their income capacity. This tends to be a winning formula as less leisure time usually translates into less expenses and hopefully the project is successful, and we end up with a bit of extra income. I’ve seen many times how people who listen to this advice, end up quitting their job and dedicating 100 per cent of their time to something they find more enjoyable.
How should we go about setting realistic savings goals?
First, be clear on your income. If it’s complex (investment properties, business income at different points in time, ad hoc expenses), a financial adviser can assist you in defining this. Then, budget for your fixed expenses and your desired lifestyle.
Everyone is having to tighten their spending at the moment, do you have advice to keep motivated in saving even when it can feel a little dull?
I’m a big believer that “growth” is the biggest motivator for humans. In tough times, I suggest clients to focus on improvements, no matter how miniscule they are. Tracking how much their debt facilities have reduced in recent times, how their superannuation accounts have increased due to recent contributions, it all helps. Every dollar counts, and once you can appreciate consistency, not effort, you will find the required motivation you need to keep going.
Is the “envelope stuffing” method or “piggy bank” style saving still worthwhile even for small deposits here and there?
Sure! Better than nothing. And if you are able to “stuff” more than $4k per year, it will put you above the median of individual savings in Australia
How are you approaching your client saving strategies currently, and how have they changed since interest rates rose?
We continuously review their spendings budget. As per cost of living increases and wages remain flat, the savings capacity reduces. In high inflationary times, we also tend to suggest clients to direct most or some of their surplus towards things that will improve their cash flows.
