The plan...

As I mentioned in my last post I am not in any debt (or at least debt that is accumulating interest*). Apart from my credit card bills that will be due in a few weeks I do not have any where that I need to put money before saving it. So far, I am in pretty good shape.

But I do have a lot of weaknesses - most of these centre around my wardrobe. I find it very easy to spend money really fast without even realising. And it is just so easy to put new purchases on my credit card and worry about where the money will come from later. At the end of the month it is usually what ever is left over in our everyday account that pays for my expensive/excessive taste. This is the money I am supposed to put into savings. So you see my problem.

After doing some research I have decided that a goal is the first step. Unlike most of the PF blogs from the US that I read I don't have worry so much about saving for retirement (employers in Australia automatically contribute 9% of your income to your retirement fund- called superannuation) so my number one concern is buying a home. After that, I would also like an emergency fund, a holiday fund and a short term savings fund. So my major money goals (for the end of 2009) are as follows:

1. $50,000 house deposit
2. $10,000 emergency fund
3. $ 5,000 holiday savings
4. $ 2,000 short term savings

This may seem really ambitious but I want to push myself. Plus, I think I can do it.

In order to achieve this I am implementing a few things I have learnt from GRS (most of which are quite standard among PF literature and none of which are ground breaking). They are:

1. Pay yourself first
2. Ditch the credit
3. Track every penny, and
4. Target your savings

Pay yourself first

My savings account should not be added to on the odd occasion that there is money to spare at the end of the month. It should be the first priority. Well, maybe after paying the rent.
I have worked out that with my current savings of $10,000 in a high interest (7.00%) account it will take $2100 a month to get to $50,000 by December 2009. That's over $500 a week! But I am determined. So each week, before anything else, I will be transferring $500 into the savings account. Then I will pay the bills. Then I will allocate discretionary weekly spending money for my husband and I and hopefully at the end of the week there will be a little left over for the other savings goals.

Ditch the credit

My credit card is my best friend. It is also my worst enemy. Every month I almost max out two credit cards. Now calm down, firstly, they have relatively low limits ($2,000 and $3,000 respectively). Secondly, everything goes on these cards- groceries, petrol, bills, etc. Thirdly, I pay them off in full before the due date every month. I do not pay any interest. So far, I actually think I am doing ok. I know a lot of people who are in worse shape. Still, I know they are my weakness and they stop me from realising the real status of my finances. So I will be putting a stop to them for everything but necessary online purchases.

Track every penny

This is exactly as it sounds. But be warned, it may seem like a no-brainer but in practice it is tough. You forget so many things, well at least I do. It's so easy to forget the cup of tea on the way to work, the chewing gum at the newsagency, the milk on the way home and the list goes on.

Target your savings

I mentioned above what my savings goals were. Working out what you want to achieve is step one. Then you have to save for them. For many people (like my husband) they can throw everything into the one account and still have it mentally allocated to specific purposes. They will know when they have enough for their short term goal or when their emergency fund is adequate.

I am not one of these people.

I am a box person.

I like things to be seperated.

I like things to be uncluttered.

I like things to be clearly marked.

Commonwealth NetBank is my new best friend (sorry Visa, it was fun while it lasted).

* For any non-Aussies reading- my University fees were paid using HELP. This is an interest free loan from the federal Government. You are not charged any interest however the amount owed is indexed annually according to the Consumer Price Index (about 2-3% each year). Once you reach a certain income level a small percentage of your income is taken automatically each week by the tax office until the loan is paid off – if you never earn enough to pay off the loan then it just never gets paid off. My current loan is about $35,000 (two degrees – Politics and Law). You can make voluntary repayments at any time to receive 10% off.