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The "golden rule" is to separate your cash - and set up automated payments. Picture: iStock

’Golden rule’ to save a fortune

WE'RE all want to make ends meet and get ahead but for many of us balancing the budget and building up our savings doesn't come easily.

Research in recent years has uncovered alarmingly low levels of financial knowledge among Australians when it comes to saving and investing.

Every two years, news.com.au runs its Cost of Living Survey to learn more about our readers' biggest household money worries.

The results of the most recent survey are in, and news.com.au has now kicked off the Money Project in response - revealing the biggest money challenges facing Australian households and offering practical help on how to get your finances in shape for 2020.

The survey found bills, costs and savings were the issues respondents were most worried about, with the majority "frustrated" with Australia's rising cost of living.

When it came to debt versus savings, the survey found about half of respondents have more than $5000 in credit card debt, while only 45 per cent have more than $5000 in savings.

But 19 per cent were carrying more than $5000 in credit card debt and 17 per cent had racked up more than $10,000 in credit card debt.

Asked how long before it would take to be free of credit card debt, 59 per cent of respondents said they already were, but 24 per cent thought it would be five years to pay off the debt.

Holidays where the main expense people were saving for, followed by a house deposit, while 25 per cent were stashing away the cash for nothing in particular.

'GOLDEN RULE'

Financial adviser Jessica Brady, who co-founded advice firm Fox and Hare, believes one of easiest ways of getting your budget on track is talking about it.

"If you create a strong budget, you need to tell your friends and family so they can help you stick to it," she said.

"Money is one of the last taboo topics and it leads to bad financial outcomes for people."

Jessica Brady (far right) wants people to talk more about money.
Jessica Brady (far right) wants people to talk more about money.

Ms Brady said students weren't taught about money at school and people don't talk about it at work, with many employment contracts specifically preventing people discussing salaries.

"We are so ingrained as people to not talk about money and it's not to anyone's advantage," Ms Brady said.

"People try to save by putting away whatever is left of their salary at the end of the pay cycle which ends up being very little."

Instead, she suggested paying yourself at the start of each pay run into a separate account and then living off the rest.

Another trick is setting up different accounts for living expenses, bill payments and savings - and automate all the payments.

"The golden rule with cashflow is segregation and automation," she said.

She said lower interest rates were impacting savings and that we all needed to read the fine print to score the best deals.

"Make sure you're not just getting an introductory rate, look at the clauses and conditions to receive that bonus interest," she said.

Mark Jones, CEO of marketplace lender SocietyOne, told news.com.au many people didn't realise how much interest they were paying across multiple credit cards and loans and consolidating debts into a low rate personal loan could save thousands.

He said another common mistake was putting a large expense on a credit card and not paying it off within the interest-free period.

"With some credit card interest rates over 20 per cent per annum (after) a few purchases like this, you could end up paying far more than you ever anticipated, taking into account the interest you paid on top of the original purchase amount," he said.

SAVE $27,000 'IN A YEAR'

According to Canstar's money expert, Effie Zahos, it is possible to save more than $27,000 in 12 months by following 12 simple steps.

They include negotiating a better deal on your mortgage, selling unwanted items on Gumtree or eBay, taking advantage of the sharing economy, starting the "Coke bottle challenge" by popping every spare $2 coin into an empty bottle, using a cashback site to top up your super, taking your lunch to work, and cutting your telco, grocery and energy bills.

Other tips include deleting apps that cost you money and switching from a rewards credit card to a non-rewards credit card.

 

 

MAKE YOUR MONEY WORK FOR YOU

According to Finder.com.au's comparison tool for savings accounts, Rabobank and AMP offer two of the best high-interest savings accounts.

The best interest rates, according to finder.com.au.
The best interest rates, according to finder.com.au.

Rabobank has a maximum variable rate of 2.50 per cent while AMP has one of 2.36 per cent.

However, both of these offers are for an introductory period of four months and then revert back to 1.05 per cent and 1.40 per cent respectively.

This is well below the inflation rate of 1.7 per cent, and more in line with the big four major banks who offer similarly low rates.

Meanwhile, newer digital banks like Up, 86 400, Xinja and Volt offer interest rates of between 2.15 per cent and 2.25 per cent without time limits.



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