Katrina Foster is a finance expert with Choosi. In this piece, we asked her to comment on the challenges and opportunities for seniors looking to save in the New Year.
What do you feel are the biggest challenges facing seniors that are trying to save?
Lack of money, impulsive spending and lack of discipline are the most common barriers to saving regularly. For the older cohort of Baby Boomers, lack of money is cited as the biggest obstacle to regular savings.
Based on findings from the latest study by Choosi and CoreData, saving is a constant challenge for most Australians, with many describing themselves as ‘average’ or ‘terrible’ savers and many not keeping track of their spending regularly.
In terms of age generation, Baby Boomers are the most likely to agree that they struggle with saving enough money regularly (58.3 per cent), while Pre-Boomers are the least likely to (44.1 per cent). Interestingly, Pre-Boomers are more inclined to label themselves as ‘superstar savers’ while Baby Boomers tend to say they are ‘terrible savers’.
For those who have already retired, more than half (53.2 per cent) describe their current standard of living as modest, comfortable or extremely comfortable. However, close to a third (32.1 per cent) are unsure on their current standard of living as they have to rely on government assistance.
Are there any savings tools/techniques you would recommend for people on a fixed income?
Download your bank’s app so that you can monitor your account balance and manage your money on-the-go. Use automatic direct debit to your savings accounts. Always have a documented budget and track your expenses regularly. There are so many applications out there that can help you do this, such as TrackMySPEND or Pocketbook. These apps are quite versatile and allow you to establish, plan and manage your budget, as well as visualise your progress.
If apps aren’t your preferred method, simply draft up a budget sheet in Excel with key sections like monthly income, fixed expenses, disposable income and expected savings. Set a reminder to review and update this document every fortnight or as needed.
Find ways to motivate yourself – this can take shape in varying ways for different people. For example, you can partner up with someone to commit to the same goals or you can make it a competition with family or friends.
Moving into the New Year, what are some good savings resolutions to adopt?
Have a good understanding of good debt vs. bad debt. Never spend more than what you earn and always pay off your credit card in full every month. Download a savings application or commit to a budgeting method. Findings from the Choosi study showed that Gen Ys are the most likely to use savings applications as a trick or habit to motivate themselves to save regularly, while Baby Boomers are the least likely to do the same. Embrace the convenience of technology for the New Year and give it a go. If it doesn’t work out, find an alternative budgeting method you can stick to.
Mitigate financial security risks by planning for contingencies. Pre-Boomers are the most likely to cite health issues (57.9 per cent) as the greatest financial security risk. Give yourself peace of mind in 2017 by setting aside emergency funds to cater for unexpected situations where you may be suddenly unemployed or unable to work for more than three months.
Are there any extreme budgeting measures you’d recommend for seniors with lofty savings goals (i.e. seniors saving up for a big trip)?
If you’re on a fixed income, the best way to achieve lofty savings goals is to reduce your monthly fixed or disposable income. Review your expenses with a critical eye and be ruthless about the possible cuts you can make.
For example, if you have monthly subscriptions to magazines, consider unsubscribing for a set period of time, or share the cost with a friend/partner who may also be interested in the same product/service.
Take on a casual job. You can set your own schedule and make some extra pocket money just by doing things you may already do in your day to day routine.
For seniors that struggle to save, it may be worthwhile seeking out professional advice to get assistance on setting financial goals and documenting a plan to achieve these goals. Alternatively, turn to the financially savvy family members and friends in your network and get their advice on saving tips and hacks you can adopt.
For more information you can visit the Choosi blog here.
This article is for general information only. You should seek formal financial advice on your specific circumstances.