I could give up drinking coffee, if I wanted to

Today the Australian Government’s Financial Literacy Foundation released the findings of research into the financial literacy of Australians. The results are a real eye opener. I was very surprised to read that most Australians are confident in their ability to manage their money and create wealth. I was not surprised to read that for most people this self-confidence does not translate into action. (View the research report.)

Controlling your cash flow is fundamental to creating wealth. You need to save money by spending less than you earn. Creating and sticking to a budget is one tool to assist you in understanding your capacity to save, and in helping you to consistently save.

According to the research 88% of Australians are confident in their ability to save, and an even higher 90% say they have the ability and understanding to budget day to day finances.

This ability has not translated to action with only 62% of Australians saving regularly and an even lower 48% using a budget to control spending. It seems that almost half of Australians (43%) spend first then save the leftovers, if there are any.

It appears that it is not knowledge that is holding people back from great wealth, but action is the true obstacle.

If you are struggling with motivation to consistently save then one way to start is with small, easy steps to an achievable goal. The experience then helps you build motivation for greater saving and snowballs from there.

Here is a suggestion to help you:

  • Set up a high interest savings account that is separate to your daily transaction account
  • Arrange for an automatic transfer of at least 3% of your gross income into that account each pay period. (If you already do this then increase it by 3%)
  • Do that for one full year without touching the money.
  • Spend the year learning as much as you can about how to utilise the savings at the end of the year to build your net assets. (If you have not done so already then a great start is to subscribe for my free educational newsletter.)