8 proven ways to save 2 years’ salary
By Rachel Smith
Boom not Bust. Motivation and money – 8 proven ways to save 2 years’ salary
When I was growing up, almost all the dads worked at one of the two local factories. Back then people had a ‘job for life’, but the world has changed.
I first observed redundancies (or retrenchments) in late 2008. I remember that Monday as though it were yesterday. I watched men and women pack their things into cardboard boxes and saw adult professional men sit and cry. Since then I’d been disturbed and at times absolutely terrified by the veil of silence over redundancies—before, during and after they take place. I’d seen the good, the bad and the downright ugly. I’d seen people pivot, change and transform their lives; I’d heard stories about colleagues who’d lost their life savings, their marriages and their homes; and I’d witnessed leaders in my community admit to suicidal feelings.
I knew my industry was changing. Technology was replacing people, computer systems had become more efficient than traditional processes, design tasks were being undertaken offshore in 24/7 design centres, companies were merging, consultancies were restructuring and disrupters like Uber were changing everything faster than anyone could have expected.
So, I spent over two years consciously getting prepared for the future—mentally, financially and professionally. And when I took my redundancy in December 2015, I had more than two years’ worth of salary in a long-term savings account. It had been hard work saving so much money, but I felt financially well prepared.
Everyone’s circumstances and financial obligations are different, but here’s what worked for me and may help you in your savings quest too.
- I set my goals and priorities. And I asked myself to finish this sentence: ‘If I really wanted to, I could___________’. What are your money saving goals?
- Write down everything you spend for a week—everything from the $2 bottle of milk to $50 for fuel. Which purchases were wants, which were needs and which did you really enjoy?
- Do an audit of all your direct debits, standing orders, subscriptions and monthly charges. How much are you really spending? Where are the leakages?
- When I was a child, my grandmother had different jam jars in which she kept cash for different household bills. So, I went to the bank and set up eleven bank accounts, allowing me to replicate the jam-jar system in the digital world. I have bank accounts for bills, groceries, insurances and fun. How many accounts do you need to have?
- I set my own ‘gig economy’. I rented out my driveway, my garage and my spare room. A lodgers rent can cover half the mortgage.
- Spend less than you earn. What could you cut? I realised I don’t need to buy a take-away coffee every day. A coffee once a week is a treat that I thoroughly enjoy
- I have a rule to save at least 20% of everything I earn. For me, saving a percentage of every dollar I earn is a nonnegotiable. Why? Because I don’t have a permanent job and no-one knows what the future holds.
- I write down what I think I want to buy on a ‘three-month waiting list’. I keep my ‘Want List’ in the notes section on my iPhone. If I still want and need said item when the 90 days have passed, I buy it. Nine times out of ten I don’t. Last October I thought I wanted a trampoline. 90 days passed and in January I said “Why on earth did I even write trampoline on the list?!!” If 3 months is too long for you, have a go at waiting 7 days!
And finally remember two things define us. Our patience when we have nothing and our attitude when we have everything.
Rachel Smith is the author of Underspent. She didn’t buy anything new or 2nd hand in 2014 and saved $52,680 (38% of salary). She changed her spending and transformed her savings. Rachel teaches people how to break the habit of impulse shopping in 7 steps. www.cyclingrachelsmith.com