At the top of the New Year’s resolution list might be getting your finances sorted – and in the current economic climate it’s never been so important.
At the top of the New Year’s resolution list might be getting your finances sorted – and in the current economic climate it’s never been so important.

How much savings you need to have

As we enter a New Year with resolutions to get fitter and healthier, for many Australians finances also need some attention.

According to money educator and finance expert Vanessa Stoykov, we should all aim to have at least three months' salary saved in the bank. So if you earn $5000 a month, you should aim to have around $15,000 in your savings bucket.

If you can stretch it to six months' salary, especially as you get older, that's even better, Ms Stoykov said.

Having savings put away while we're in the current economic climate has never been more important, she said.

"Now more than ever, savings is the new black," she said.

"In your 20s, you should have three months' salary in your savings. By the time you're in your 30s, you should aim to have six months," Ms Stoykov told news.com.au.

"Try to go harder if you can. Suze Orman, Oprah's finance expert, is now saying you should have 12 months of your salary saved." But Ms Stoykov added, "That's quite a lot, especially if you have children."

Aussies should aim to have at least three months’ salary in savings, if not six months, according to experts.
Aussies should aim to have at least three months’ salary in savings, if not six months, according to experts.

SAVINGS BUCKETS

The best strategy to reach this savings goal is to automatically put away around 10 per cent of your salary each month into a "non-touchable" account that you don't even look at, except maybe once a month "to make yourself feel good".

"Don't touch it and never look at it," Ms Stoykov advised.

"Super works because they take 9.5 per cent off you. It works because you don't see it. Set up auto payments and don't look into that savings account," she said.

Ms Stoykov said it's important to know what your monthly costs are but you don't necessarily need a budgeting spreadsheet to have control over your finances.

She directs people to the free Moneysmart calculator to calculate what your monthly costs are. "It calculates your true cost of living," Ms Stoykov explained.

She suggests having your money split into separate buckets to ensure you have long-term savings, as well as money for expenses and a separate account for goals you're working towards. "You can spend what's left," she said.

"The more you can separate your money the better off you'll be," she said.

Ms Stoykov added that "people have got to be realistic", especially if they have children. "Do what you can," she said.

Putting your money insto separate buckets can help reach a savings goal while leaving you enough for expenses and splurging.
Putting your money insto separate buckets can help reach a savings goal while leaving you enough for expenses and splurging.

SPENDERS VS SAVERS

Australians are divided by their attitudes to spending, according to new research by comparison site Finder.

A new nationally representative Finder survey of 1004 Australians revealed that almost two-thirds of Australians - 61 per cent - consider themselves "savers", while the remaining 39 per cent are self-professed "spenders".

Of those who save their money, 44 per cent are predominantly frugal but admit to splurging from time to time, while 17 per cent are steadfast savers who like to be prepared.

Spenders are made up of those who still manage to save a little (around 30 per cent of those surveyed), and those who don't save anything (around 9 per cent of surveyed participants).

Ms Stoykov added that the best way to curb spending is to unsubscribe from all the online shopping emails and texts you get to put a halt to the temptation of impulse buying.

"Stop getting those emails and texts and unsubscribe from everything," she advised.

The research also found that the majority of baby boomers - 69 per cent - are savers, compared to just 51 per cent of millennials.

While baby boomers are touted for their ability to save, Ms Stoykov is quick to acknowledge millennials are actually quite savvy when it comes to money, savings and investments.

"Baby boomers are better at saving because they grew up in a post-war time and they bought their houses cheap," she said, but added that millennials have unpredictability with their income because of the increase in contract work.

Ms Stoykov added millennials also are open to other investment strategies that don't necessarily include buying a house.

"Buying a house isn't the only strategy," she said.

Having control of your finances starts with your money mindset.
Having control of your finances starts with your money mindset.

MONEY MINDSET

Taylor Blackburn, personal finance specialist at Finder, said that an individual's "money mindset" is the key driver behind their spending habits.

"Your underlying beliefs about money influence your purchasing decisions, and ultimately, your long-term financial position," Mr Blackburn said.

"Some savers may be afraid to spend money if they've been in a vulnerable position in the past, while others may have a financial goal they're working towards.

"There's nothing wrong with splurging occasionally, but spenders can self-sabotage if they're prone to impulse buying and too much retail therapy," he said.

"Becoming aware of your money mindset is an important first step towards taking control of your finances."

Mr Blackburn urged Australians to use the New Year as a chance to tune-up their finances.

"Just as marriages and friendships require work, so does your relationship with your finances," he said. "The New Year is a great time to review your money mindset and hit reset if necessary."

He suggested to ask yourself some important questions: "What feelings do you have around the state of your spending? Are you sabotaging yourself? Could you educate yourself on a particular area of your finances?" he said.

"It's never too late to start over and regain control," Mr Blackburn said.

Originally published as How much savings you need to have