Well, we’ve made it to the end of our three-part series on getting your finances in order. While part one looked at how to stop the rot, and part two focused specifically on managing debt, this final part will explore establishing good financial habits, so that with a bit of luck, money worries will forever be a thing of the past.
While this article can be read on its own, we recommend reading parts one and two first if you haven’t already.
The power of bucketing
If you’ve created a budget as described in part one, you’re already doing well. But the thing about habits is, you’ve got to keep doing them. Otherwise they’re not habits, right? In the context of budgeting, this means sticking to what you’ve created.
A popular way of doing this is via a method known as ‘bucketing’. The essential idea is that you have a number of separate bank accounts (or ‘buckets’), each with its own particular purpose. Typically, this would involve one dedicated to your essential expenses (e.g., mortgage or rent, power bills), one for non-essential spending (e.g., hobbies, socialising), one for savings and, ideally, a fourth for an emergency fund.
You then allocate however much of your income you’ve budgeted to each bucket every time you get paid, the idea being that there’ll always be enough to cover the expenses assigned to that bucket. If you’ve done your sums correctly, this should mean you’ll never find yourself short again.
How good does that sound?
The importance of an emergency fund
Once you’ve got the first three buckets sorted and you feel ready, it’s recommended to create a fourth for an emergency fund. Why? Because life has a habit of biting you on the backside. If you’ve got an ever-growing lump sum tucked away, you can deal with unexpected life events like losing your job, medical emergencies, and car repairs without having to raid your savings or, worse, getting into debt .
Three months’ salary is a great initial goal to aim for, but if you can get to six or more, so much the better!
A great way to grow your savings
Another major plus point of bucketing is that it ensures you’re consistently growing your savings. The importance of this can’t be overstated. One of billionaire investor Warren Buffett’s most famous sayings is, “Do not save what is left after spending, but spend what is left after saving.”
And if you think about it for a moment, the wisdom of this idea is obvious. If you wait until the end of your pay cycle to see how much of your salary is left for saving, chances are the answer will be somewhere between ‘not very much’ and ‘big fat zero’.
The bucketing method flips this mentality on its head. There’s no guarantee you’ll end up one of the world’s richest people like Warren Buffett, but you’ll definitely be better off than you otherwise would be .
If you’re the type that’s tempted to dip into your savings, we have a solution. When you set up The Vault on your savings account, the balance will be hidden from you. Your regular payments and transfers will work as usual, you just won’t be able to see how much is in there. Nice.
Switch to a savings account with bonus interest
While we’re on the subject of saving, it’s worth bearing in mind that some high-interest savings accounts offer generous bonus rates when certain eligibility criteria are met.
For example, if you deposit at least $2,000 into a Great Southern Bank Everyday Edge Account and make five or more Visa Debit card transactions every month, then you will qualify for a competitive bonus interest rate on a linked Great Southern Bank Home Saver Account .
If this sounds a touch complicated, it really isn’t. It can be as straightforward as depositing your salary and buying five coffees (or five sets of grocery shopping or five, well, anything) a month with your Visa Debit card.
It pays (literally!) to familiarise yourself with the conditions required to earn bonus interest on your savings account. You might even want to set up scheduled payments to make sure you never miss out .
To make life even easier, we’ve got a Bonus Interest Tracker tool which can show you at any time where you’re at meeting the conditions for earning that sweet bonus interest.
Take advantage of clever savings tools
You can get some serious savings momentum by combining a high-interest savings account with clever savings tools like The Boost.
With The Boost, you simply choose an amount from $0.01 up to $5 to be automatically transferred to your savings account whenever you use your Visa Debit card.
Final thoughts
We understand that many people are suffering right now due to the cost-of-living crisis. And we also appreciate just how distressing financial difficulty can be. Having said this, more often than not it’s the psychological element that’s the biggest obstacle to getting your finances back on track.
The truth is, while there will always be cases which require external help, it’s relatively easy to begin turning most situations around by implementing the strategies detailed in this blog series. So… what are you waiting for?
Important Information
Great Southern Bank, a business name of Credit Union Australia Ltd ABN 44 087 650 959, AFSL and Australian Credit Licence Number 238317. Conditions, fees and charges apply. This is general information and does not take into account your objectives, financial situation or needs. Consider the appropriateness of the information, including the Terms and Conditions (T&Cs) booklet, before acting on it. The Financial Claims Scheme may apply to this product; refer to the T&Cs for more information.