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The Relationship Between Saving Motives And Saving Habits

Before we dive in, take a moment to consider which of the following best describes you and your household in terms of your current saving habits?

  • Save regularly by putting money aside each month.
  • Spend regular income and save other income (such as investment income, bonuses etc.).
  • Save the income of one family member and spend the other.
  • Save whatever is left over at the end of the month (no regular plan).
  • Do not save.

Saving motives and saving habits 

When it comes to the saving habits of households, there are often three distinct camps, the regular savers, the irregular savers and those that do not save (the non-savers). Interestingly, there is often a relationship between saving motives and saving habits*.

Importantly, saving motives can include things such as, for retirement, for children’s needs, to buy a house or consumer durables (e.g. fridges, motor vehicles etc.), for holidays, for emergencies and to have funds in reserve for necessities.

Here are some interesting findings regarding the relationship between saving motives and saving habits:

  • Someone that has a motive around saving for emergencies and/or retirement is more likely to be a saver, whether regular or irregular.

Also, if we look at people that save regularly versus irregularly, regular savers have a more positive relationship with a retirement saving motive, a high income and/or a long-term saving horizon.

With the above in mind, it’s important to remember that the source of your wealth creation is you. For some of us, saving may be second nature or come easy due to circumstance, whilst for others, it may be more of a struggle. What is important is to enjoy life now whilst also taking the time to make sure this enjoyment flows through and is experienced by your future-self as well.

By having a clear picture of why you need (or want) to save, as well as the motivation and roadmap to achieve it, you might just find this makes all the difference.

The current climate affecting savers

Admittedly, the recent economic environment, namely slow wage growth and the rise in the cost of living may be disrupting the efforts of savers through the need to divert more of their disposable income away from saving to spending.

Unfortunately, the impact of this may be evident in the survey results from ASIC’s Australian Financial Attitudes and Behaviour Tracker (Wave 5). For example, of the Australians surveyed:

  • 23% saved money using a savings account that was automatically linked to their pay. This is down from 24% in the previous survey (Wave 4).
  • 31% saved money using a savings account that was not automatically linked to their pay. This is down from 38% in the previous survey (Wave 4).
  • 16% saved money but not through a savings account, for example, put money in an envelope or money tin. This is up from 13% in the previous survey (Wave 4).
  • 12% saved money by making voluntary contributions to their superannuation account. This is down from 13% in the previous survey (Wave 4).
  • 20% saved money by paying more than the minimum amount off their mortgage or other personal loan. This is down from 22% in the previous survey (Wave 4).
  • 21% did not save any money over the last six months. This is up from 19% in the previous survey (Wave 4).

Moving forward

When it comes to saving, it’s important to understand the positive effects associated with saving a portion of your income from employment each payment cycle. For example, saving can help with:

  • Your capacity to establish and build-upon an emergency buffer (e.g. for unexpected events, such as job loss, medical/dental emergencies, or home/car repairs).
  • Your capacity to utilise and rely on your cash/debit cards, as opposed to credit cards, to meet lifestyle expenses.

For those savers impacted by the current economic environment, some relief may be on the horizon if several of the Government’s 2018 Budget proposed measures are legislated and come to fruition, such as the 7-year personal income tax plan.

In the meantime, it’s important to take stock of your existing financial situation, goals and objectives. This may involve, a closer look at your household expenditure to see whether there are areas were surplus income could still be realised, as well as the continuation of tracking your spending and comparing the results to your budget planner.

 

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Renovating The Smart Way? Avoid These Four Mistakes

Never renovated a property before? Here are four mistakes to avoid when it’s home improvement time.

Mistake 1: Not doing enough research

Don’t start work without knowing the details. You need to research building materials and tradespeople and understand the legal and regulatory aspects of a renovation.

Find out how much materials and tradies cost. You can request several quotes to get a realistic price range. You can also find out if there are discounts on offer – for example, for bulk-buying or early payment – or opportunities to negotiate.

Before you start, ask your local council whether you need any permits. Fines for unlawful renovation can be hefty, as can the cost to repair or rebuild.

Mistake 2: Failing to plan properly

Poor planning can cause big problems. Your budget or schedule could blow out, the property might end up worse off, or you might not achieve what you really wanted to.

Planning should include these three elements:

  • Scope: What you want to do and the resources you need.
  • Schedule: When different aspects of the renovation should happen.
  • Budget: How much you plan to spend.

If you’re having trouble, consider hiring professionals. This may be an architect to provide drawings, or a construction manager to juggle the different elements.

Mistake 3: Underestimating costs

First-timers often make the mistake of setting a budget – “we’ll spend $50,000” – without knowing what it will buy. Don’t fall into that trap. If you research building materials, you’ll be more likely to buy the right quantities at the right price. If you make detailed plans, your trade quotes will be more accurate. Good research and planning will help you create a realistic budget.

Remember to build some contingency ¬into your budget in case things don’t go to plan. Adding 10 to 20 per cent to the final budget is a good rule of thumb.

Mistake 4: Hiring the wrong people

Labour is one area where you’ll want to cut costs, but quality should trump price.

  • Hire for the job: It’s tempting to hire a jack-of-all-trades, but try to hire specialists for important jobs. For example, hire a plumber, not a handyperson, to install a sink.
  • Make sure the tradesperson is licensed: The tradie is accountable for his/her work, plus the renovation comes with a warranty.
  • Check references: Word-of-mouth recommendations are often the best reference. Also look for genuine testimonials and signs of quality work, such as industry awards or positive media coverage. Your house has a better chance of becoming your dream home when you avoid the most common renovation pitfalls. When it comes to financing your renovation, your mortgage broker can help.

This article is not intended to be comprehensive nor does it constitute legal advice. If you have questions, feel free to talk to us.

 

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New online bank set to launch in 2019

A new, online-focused bank is coming to Australia in the hope it can lure customers from the big four banking giants.

The bank- which will be called 86 400 after the number of seconds in a day – will start offering transaction and savings accounts from early next year followed by home loans by June.

UK banking veteran Anthony Thomson, who will chair the new company, says Australia has the most profitable banking market in the world because of its high fees and charges.

Australia’s top four banks – Commonwealth Bank, ANZ, National Australia Bank and Westpac – posted a combined $31.5 billion in cash earnings in 2017, up 6.3 per cent from a year earlier.

“Banks in general, Australian banks or UK banks, have lost sight of the customer, they just think they exist to make money, and I believe passionately that profit is a by-product of giving the customer better products, a better service or better experience,” Mr Thomson said.

86 400 will be only an online bank, with customers to do all their banking via a phone app.

The bank is for cashless transactions, offering customers the ability to use digital services such as Apple Pay, Samsung Pay and Google Pay, but does provide an option for ATM cash withdrawals via Visa debit cards – made easier by the big four banks recent decision to scrap foreign ATM fees.

The bank currently consists of 60 people but will have a customer service team based in Sydney to answer calls and chat messages.

A former head of ANZ Bank’s Japan operation, Robert Bell, is CEO of the bank.

Its executive team also includes a former Westpac general manager of digital and a former CBA international chief risk officer.

The bank is working with APRA to obtain a full banking licence ahead of a soft launch towards the end of the year and entry into the public market in the first quarter of 2019.

Mr Thomson said the bank will have a lower cost base than traditional banks because it doesn’t have legacy technology and physical branches.

Mobile banking is rising in popularity in Australia: research from Roy Morgan shows around 8.3 million people used mobile banking in an average four-week period in the six months to June, 2017, up 72 per cent from 4.8 million users for the same time period in 2013.

Mobile banking was used by 41.5 per cent of banking customers, compared to the 26.5 per cent using branches, the 2017 Roy Morgan survey found.

Mr Thomson is hoping to replicate his success with UK online banks Atom Bank and Metro Bank, in Australia.

Metro Bank was launched in 2010 and after six years had one million customers and a market capitalisation of $5 billion, Mr Thomson said.

Payment processor Cuscal is backing 86 400, with additional shareholders expected to come on board.

 

 

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Renovation jobs you can do yourself – and those you shouldn’t

When it’s time to renovate, everyone wants to save money. It’s fine to be hands-on for some tasks, but there are a few projects that are definitely not DIY friendly. Here’s a guide to what you may want to do yourself and what you should leave to the professionals.

What to do yourself

Painting

A fresh coat of paint can give you a strong return on your renovation dollar. Painting is a job almost anyone can take on themselves, although it can be messier and more time-consuming than you might imagine.

The key to a successful paint finish lies in the preparation. Take the time to clean, sand and tape as necessary. Also, choose the right paint for the job and invest in good-quality equipment. Don’t skimp on brushes and rollers – a professional job looks professional because they use the right tools.

Handy hint: a water-based paint can help make the clean-up more bearable.

Paving

You can lift the appearance of your home’s outdoor areas with new paving. Laying bricks or square pavers is a simple task, although you do need to set aside enough time to complete each step properly.

Paving is a multi-step process, from preparing the pathway and cement through to laying the pavers. Try consulting one of the numerous online paving tutorials, or visit your local hardware store for advice.

Flooring

If your home has wooden flooring, you can bring it to life with a sand and polish. Hardware and equipment-hire stores rent out machines for home use. However, achieving a perfect finish is trickier than it looks. If you’re not confident on the tools, another DIY approach is to lay your own floating floor, or even stick down self-adhesive vinyl floor planks or tiles.

What to leave to the experts

Electrical and plumbing

Undertaking electrical or plumbing works can be illegal and potentially life-threatening if you’re not a qualified tradesperson. If electrical and plumbing works aren’t done by a professional, you’re risking personal harm, and exposing your home and family to the risk of fire or flood damage. Leave this to the experts.

Asbestos removal

Prior to 1987, asbestos was commonly used in Australian home construction. If your home was built or renovated before this date, there’s a strong chance it could contain asbestos.

Even minor home maintenance tasks such as drilling a hole into a wall or installing a light fitting can create a health risk by causing asbestos fibres to become airborne. Always engage a licensed asbestos assessor and remover to handle any asbestos concerns at your property.

Roof repairs

Many a DIY renovator has regretted the decision to try to repair their own roof. Falls from ladders are a common cause of injury. During 2011–12, 1,294 men (78%) and 374 women (22%) were hospitalised in Australia as a result of a fall on or from a ladder, and 62 per cent of these injuries happened in or around the home.

A DIY approach can be friendly on the wallet, but there are some jobs simply not worth tackling – your safety is far more important. If you’re considering home renovations, contact your mortgage broker first to find out how much you can borrow.

 

Article source here.

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