Which comes first? Saving or Investing?

Although this advice might sound like financial boot camp, the principles of this advice lay the foundations for effective cash flow management that will ultimately enable a brighter financial future.
It’s difficult to stick to a budget but you need to be really transparent about spending.The key is establishing and practicing the art of saving – setting funds aside beyond what is needed to pay bills, groceries, utilities, school fees and repayments. To do this, clients need to get real about their true costs.

Currently, Australians are saving more money than they ever have in the past 30 years.

Since the Global Financial Crisis, there has been a dual trend of increased savings and the willingness by Australians to de-leverage or to reduce debt.

This is the opposite of what was happening in the mid-1990s to the mid-2000s when Australians went into negative savings. That is, we spent more than we earned.

Financial advisers say most Australians should aim to save 10-15% of their after tax savings. Although this may be difficult in some stages of life, it is more important to stick to the practice of savings rather than the specifics of the amount.

Meanwhile, one of the most beneficial saving strategies continues to be salary sacrificing into superannuation. This allows investors to make more tax effective contributions to superannuation and is subject to thresholds.

Another great saving strategy is reducing mortgage payments via an offset account. It allows you to use your savings account balance to reduce the amount you owe on your loan.

Stripping out money as soon as you get paid also reduces the likelihood of unaccountable spending.

Although the above strategies may seem quite simplistic, when utilised in a comprehensive financial plan put together by an IAS financial adviser and tailored to your specific financial circumstances and goals, the results can be significant.