Five barriers to savings and how to beat them

Even though most of us know the importance of saving, and have savings goals we want to pursue, sometimes life gets in the way. Whether it is everyday living necessities or your weakness for having the latest gadgets holding you back, recognising savings barriers is an important step in overcoming them. 

There are five common barriers to saving that most people face and the solutions to overcome them aren’t always easy but they are necessary if you want to reach your goals. 

1. The ultimate living expense

Whether you are in the renting or owning camp there are costs associated with housing that will always be inevitable. Even so, a common rule of thumb is that you should not be spending more than a third of your income on housing expenses. If you are spending more than a third of your wage paying off your mortgage you are technically in “mortgage stress” and this is not a good place to be. Saving is almost out of the picture if you are in this situation as housing and living expenses eat away at your income.

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. If you can’t afford to live in your home and save it’s time to consider downsizing or moving to a less expensive area to reduce your rent or mortgage costs. The money you save from a move such as this will put you on track to reduce your outgoing expenses and focus on your long term savings goals.

2. 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 expense may find themselves unable to save while paying off these costs.  

If you are a full time student the government can be of assistance to you during this time. By applying through Centrelink for Youth Allowance, depending on your personal circumstance, you should be able to receive some financial assistance to cover your living and education expenses. 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 such as FEE-HELP and HECS-HELP that will allow you to defer paying tuition fees until you are employed and earning $54,126 a year or more.     

If you’re a parent of a child and can see that education costs in the future will bar your ability to save for other things then start putting aside money from now in a high interest savings account. Being prepared will always pay off in the future. Keep in mind as well that now there is no benefit for making tuition payments up front for your child’s fees so deferring them through a HELP scheme is just as good of an option, and will put less financial stress on you now, as paying them upfront.   

Realted links

• Compare savings accounts
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3. 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 that we rack up plus the interest we then owe can significantly 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. As this debt is accruing interest it should take priority over saving, to a certain extent, to avoid an ever growing debt balance.

Consolidation can be a great way to tackle your debts head on. Taking out a low interest personal loan can be one way to consolidate debts and figure out a neat payment plan that lets you budget in some saving along the way.  

If your debt is mainly on credit cards consider a zero percent balance transfer deal to 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.

4. 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 you want to be on is have an emergency fund that you can easily access in case of an unexpected event.

Whether it be unemployment, a car accident or costly medical bills having a buffer of around $3000 can mean the difference between being completely thrown of course and regaining your footing sooner.

Also keep in mind that lenders and utility provides will be lenient if you do find yourself in financial hot water and a call to explain your situation could mean the difference between using up all your savings and finding a manageable repayment plan.

5. Our obsession with shopping

Hand in hand with our credit obsession is Australia’s position 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 its costs. With any luck, the results will be enough to shock you into changing your ways. But really, the only way you’re going to achieve savings goals and beat temptation is by focusing on the long term rather than short term gains.

Keeping your goals at the forefront of your mind can 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 your dream home or car perhaps it’s no longer a good idea.

Related Links

• Online Savings Accounts
• Children’s Savings Accounts
• Term deposit vs savings accounts: What’s best for you?
• First Home Saver Account

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