5 things most likely to trip up your savings plans

We all know the importance of saving, and most of us have savings goals we want to pursue, but sometimes life gets in the way of the best kept financial plans.

Whether it’s general cost of living pressures or a weakness for the latest gadgets, recognising savings barriers is an important step in overcoming them.

Below are five of the most common barriers to saving and practical ways you can overcome them to become a master of your personal finances in no time.

1. The unavoidable: living expenses

Whether you’re in the renting or home-ownership camp, housing costs are inevitable. Even so, most experts will tell you that you should only spend a third of your income (or less) on maintaining a roof over your head.

If you are spending more than this, particularly if it’s on a mortgage, then technically you’re in “mortgage stress” and this is not a good place to be. Savings can get pushed out of the picture because housing and living expenses have eaten away your monthly income, without you even noticing.

Even though you may love the house or area you live in, if you’re serious about saving then some tough questions have to be asked. Is it time to consider downsizing? Or maybe you’d be financially better off in a less expensive area? The money you’ll save from a move such as this could help you reduce your outgoing expenses and re-focus your efforts on long-term savings goals. Another way to reduce your mortgage is to shop around for a better rate. There are plenty of lenders on the market that offer significantly lower rates than the standard variable rates offered by the major banks so it’s worth doing the research.

2. Dreaded debt

Australian’s are seemingly obsessed with the idea of buying now and paying later and our love affair with credit cards is well documented in the ever-rising credit card spend figures. But as we all know, there’s no such thing as free money, and the debt we rack up can seriously get in the way of being able to save.

Of course credit cards aren’t the only culprits. Once you factor in car loans, payday loans and of course the mortgage, most Australian’s have a sizeable amount of money owed to various institutions.

Consolidation can be a great way to tackle your debts head on and a low-rate personal loan is one way to do this. Personal loans are particularly good because they have structured repayments that will actually pay down your debt over a set period of time. Once you’ve finished paying off the loan, you can reallocate the same amount to a high interest savings account and you’ll have kick started your plans without outlaying any extra dollars.

If your debt is mainly on credit cards, a zero percent balance transfer deal could help you get a head start on paying off your dues. If the situation is a little bit direr and you’re not sure how to get back on track consider seeking professional advice from a free financial counsellor service.

Related articles:

• Melbourne vs Sydney: how the costs of living stack up
• First home owners: how much can you really afford to borrow?
• Five common credit card traps to avoid

3. Life’s unexpected curveballs

No matter how well laid out your savings plans may be there’s no accounting for the costs in life that come out of nowhere. The best you can do to avoid these expenses completely throwing you off the savings path is to have an emergency fund.

Whether it be unemployment, a car accident or costly medical bills, a buffer of around $3000 can mean the difference between being completely thrown of course and a couple of financial missteps.

Also keep in mind that lenders and utility providers are likely to be more lenient if you call to explain your situation, which could mean the difference between a good credit rating and a horrible one.

4. Paying to learn

Education is an essential expense for most people and there is no doubt that completing a degree, diploma or certificate after school can be an important step in getting the career that you want. The costs associated with education however, can be massive and those unprepared to handle these expenses may find themselves unable to save while paying off these costs.

If you are a full time student you might be eligible to receive financial assistance through Centrelink’s Youth Allowance program. If you have time to pick up a job on top of your studies than this bonus money can go towards your savings goals.

Also, depending on which course you study, the government has various ‘HELP’ schemes that will allow you to defer paying tuition fees until you are employed and earning $54,126 a year or more.

5. Our obsession with shopping

Hand in hand with our credit obsession is Australia’s reputation as a nation of consumers. While the essentials such as food and clothing basics will always be on our outgoing expenses list, it’s the extras like gadgets and luxury items that can interfere with our savings goals.

One way to curb your spending is to write down everything you buy in a week and how much it costs. With any luck, the results will be enough to shock you into changing your ways.

Keeping your goals at the forefront of your mind can also be a great way of overcoming this barrier. Sure, maybe you could do with a $500 dog bed for Fluffy. After all he is a great friend and companion… but if that takes away from your long-term goal of a dream home or car, perhaps he might be OK with a $50 mattress. 

Related links:

• Compare personal loans
• Home loan calculator: find out how much you can borrow
• Compare balance transfer credit cards

Compare savings accounts