Savings Smart Guide

1. Set goals

What you'll learn in this step: successful saving starts with small, realistic goals.

Sometimes it seems the more you earn, the more you spend. Somehow, your expenses expand to meet the size of your wallet. And, when it comes down to it, the idea of saving for an overseas trip or even the deposit on a house is a bit overwhelming – it's all too hard.

But setting yourself a goal, and breaking that goal down into bite-sized targets, is the key to successful saving. You need an incentive to give up some of life's luxuries – why cut back on your social life or trim your spending on clothes for no particular reason?

The smaller the goal, the easier it is to set out on the road to saving. You might start with a moderate ambition, such as saving for a holiday. First, think about what you want to do, when you want to do it, and how much you'll need. Then, work back from there to establish how much you need to save each week or month. Finally, start setting that aside in an account that has low fees, good interest and disincentives against touching it.

Once you've accomplished your first savings goal you'll have the confidence to move on to bigger things – a car, the deposit on a house or an investment portfolio.

Achieving a bigger goal may involve making some cutbacks. But be realistic about what you'll give up – if you're too hard on yourself, you're unlikely to stick to your plan (a bit like diets, really).

The key is to save something. One rule of thumb is to save 10 per cent of your pay. But if you've done your sums (see our step-by-step guide to budgeting) and that's just not viable for you, save what you can – every little bit adds up.

Read more about:

Seven Ways to Wealth, David Potts, November 20, 2005 – The Sun Herald: There are simple formulas to getting rich as long as you are disciplined.

Ownership rules, Annette Sampson, February 7, 2006 – The Sydney Morning Herald: It's never too late to start investing. Even with a modest salary you can build and accumulate wealth, reports Annette Sampson.