Getting started

The best place to get started in investing is to establish a savings plan. The key to successful saving isn't having lots of money, it's consistency and discipline. Successful savers don't rely on remaining motivated; instead they devise a system to keep their savings plan on track, no matter what. Successfully building wealth is a commitment you make to yourself.

The best way to save consistently is to have a system that looks after itself. For example,you could have your savings deducted from your salary and sent to a separate account. If this isn't possible, consider setting up a transfer from your bank account to your savings account. Schedule it to occur the same day your salary hits your account.

How much should you save?

How much you save depends on your personal goals. To give you an idea, many financial specialists suggest 10% of your income is a good place to start. If this seems a lot, think about how much money slips through your fingers every week without you even noticing.

For example, those impulse buys may be what's stopping you reaching your financial goals. Consider your daily $3 cup of coffee. Day by day it seems like loose change, but in a year those coffees cost around $1,000.

If you are employed, your employer is already helping your savings plan by contributing 9% (minimum) to superannuation on your behalf, but it's important you consider what else you can or need to save to meet your goals and objectives.

Tip: An excellent way to save without even noticing is to have a jar at home into which you put all the coins you've accumulated during the day. Once a month take it to the bank. You'll be amazed at how it adds up!

Get where you want to go: achieving your financial goals

Financial goals can be divided into the following categories:

• Short term (0-2 years), e.g. a new car, your next holiday
• Medium term (2-5 years), e.g. an extended overseas trip, deposit on a house
• Long term (5+ years), e.g. major home renovations, retirement

It helps to write down what you want to achieve over each of these periods. By defining your goals you'll have a clearer direction and can make savings and investment decisions with confidence.

Defining your goals

When defining your goals be specific and spell things out. For example, "I want to save $100,000 for a mortgage deposit in three years time". Or, "I want to retire at 60 with an after-tax income of $50,000 a year which will last at least 25 years". It's important to set a specific deadline for each of your goals. This focuses your mind as well as your savings strategy. You will need to determine:

• Goals
• Amount you've already saved
• Amount you need to save
• By when

 

Once your goals are clear, the next step is to work out how much you need to save to reach them. This requires developing a budget.

The power of budgeting

How many times have you heard 'if you look after the cents, the dollars will look after themselves'? Most of us have great intentions but somehow never seem to get around to actually making things happen. Unfortunately, unless you have the discipline to put together the numbers, you're unlikely to make much headway.

One of the first steps towards reaching any financial goal is to establish a budget. When it's done you should have all the information you need to devise a savings plan to reach your goals.

Don't panic, budgeting is easy! Use our simple budget planner to get started. Once you have written down your expenses and matched them against your income there will hopefully be a gap. This 'gap' represents the money that you can use for your savings and investment plan.

The important thing is to get started

No matter how much time you spend observing your expenses, considering your savings strategies, or researching your investment options, until you actually prepare your budget and put your savings system into action, you won't be getting anywhere as fast as planned. So, commit to a time when you'll write down your goals and prepare your budget. Then stick to it. You could be saving towards your successful financial future from your very next pay.

If you're just starting out and have no savings yet it's probably easiest to start with a savings account. Once you have saved $1,000 or more and you can afford to save at least $100 a month, you can start to consider many other investment options, such as managed funds.

You may even want to consider paying off debt as a way to save and use the strategy of borrowing money to invest.  This strategy certainly isn't suitable for everyone though, so seek financial advice first.

Seek advice on the strategies that suit you

When you're just starting out, good advice is important to ensure you're on the right track. Commonwealth Financial Planners specialise in helping you make the right financial decisions for your individual situation. A Commonwealth Financial Planner will work with you to develop a savings plan designed to achieve your personal financial goals.

To find out more about how a Commonwealth Financial Planner may be able to help you, or to make an obligation-free appointment with a Commonwealth Financial Planner, call 1800 241 996 or email us.

 

Important information

• This is not advice, this provides general information only and does not take into account your individual financial circumstances or investment objectives. You should assess whether the information is appropriate for you and consider talking to a financial adviser before making an investment. Investment products are subject to investment risk including the loss of income and capital invested. Colonial First State Managed Investment Funds, FirstChoice Investments and FirstChoice Wholesale Investments are issued by Colonial First State Investments Limited ABN 98 002 348 352 AFSL 232468. Product Disclosure Statements (PDSs) describing the products are available by contacting Investor Services on 13 13 36. You should consider the relevant PDS before making a decision about the product. The responsible entity, Colonial First State Investments Limited receives fees.
• Commonwealth Financial Planners are representatives of Commonwealth Financial Planning Limited ABN 65 003 900 169 AFSL 231139. Commonwealth Financial Planning Limited is a wholly owned but non-guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124.