4 Tips to Boost Your Bank Account!
A few weeks ago I was talking with friends about some of the ways I manage money in order to consistently maximise my savings and grow my overall monthly income. Some of the things I mentioned at the time seemed pretty basic/common to me but then again, money management isn’t really common knowledge especially since these kinds of real-life skills aren’t taught in schools despite the fact that pretty much anything you want to do in life requires some amount of money. However, I am seeing a lot more people popping up on Instagram, YouTube, as well as some other lesser-known places covering this topic quite well. Still, I think the topic of money and wealth management largely remains taboo in modern society.
With all that being said I figured it would be a good idea to write a blog post and detail my most effective tips and tools for boosting my bank account and hopefully, they provide you with some valuable insight into how you can potentially increase your bank balance each month.
At this point, I feel like we have arrived at the most suitable time for me to mention the following disclaimer (everyone loves a good disclaimer don’t they?)
Disclaimer: Everything I am discussing here in this post is NOT to be taken as financial advice. I am not a certified financial advisor. Everything I am discussing here is purely what I personally use and have used over recent years to manage money. This information is only to be taken as a general guide and provide ideas for increasing your earning potential. Please do your own research and/or consult a qualified financial advisor before looking to invest money in any of the ways mentioned in this article.
Here are my four most effective tips for boosting your bank account:
Tip #1: Create a budget
Creating a budget may sound boring and tiresome to some people but that’s only because of the social stigma and perceptions around it. People have all kinds of reasons why they don’t want to bother with budgets, most of us don’t like the idea of being restricted (as is the case with our current statewide lockdown situation for example) and in some ways, a budget can trigger those feelings of having to restrict your spending. But when you have a defined strategy or goal behind what you want to do with your money, creating a budget is really the only way of accurately understanding how much money you have to work with. Additionally, it’s also worth mentioning that any good budget must cater to your lifestyle.
There is no one-size-fits-all when it comes to financial budgets so if you like going out for dinners 2-3 times a week (when we could do that) and having three or four coffees each day then you must factor this in. Lifestyle expenses are important, it’s these purchases that support our happiness and wellbeing on a daily basis and so I’m all for making sure a budget isn’t restrictive.
Here are the seven (7) key metrics I use to calculate an effective budget.
Monthly Earnings After Tax (MEAT)
Monthly Expenses (ME)
These are non-negotiable expenses like; water, gas, and electricity bills. Rent, streaming services, etc.
Total Monthly Spending (incl. Lifestyle Expenses) (TMS)
These are variable expenses as these depend largely on how you like to live each month. Include things such as; dinner and drinks with friends, Uber eats meals, daily coffee, new clothes…etc.
Monthly Lifestyle Expenses (MLE)
Monthly Residual Income (MRI)
Monthly Individual Savings Target (MIST)
Total Monthly Residual Income (TMRI)
( MEAT - ( ME + TMS ) ) = MRI
MRI - MIST = TMRI
Here it is as a worked example using $6,500 as our monthly earnings after tax (MEAT) and a monthly savings target of $2,000:
6,500 - ( 900 + 1500 ) = $4,100
$4,100 - $2,000 = $2,100
In the above example, our MIST is almost 30% of our MEAT which is already above the most commonly recommended monthly savings targets of 20-25% of your total income.
So we now have a $2,100 TMRI, it’s with this total residual income that we can start to get adventurous with later on in this post, and at this point, I’d like to remind everyone of that lovely disclaimer I mentioned earlier in this post.
Tip #2: Spread Out
When it comes to banking there are plenty of choices around where you can put all of your money. There are even more options today than there ever has been in the past with the recent surge in online-only banking services and although having so much choice is generally a good thing, it comes at the cost of making it more difficult to find a provider that offers the best returns possible. However, using comparative finance websites like finder will be your best friend in this situation.
The idea behind spreading out your money is that you have separate bank accounts set up to take advantage of how you use your money. In some cases (not all) you may find that your current bank doesn’t offer a high-interest savings account option. If this is true in your case then it is definitely worth researching some of the best high-interest savings account options available and opening an account where you can send your savings each week/month in order to start earning as much interest as possible on your savings.
Tip #3: Automatic Transfers
When it comes to saving and accumulating money I have found that the most efficient way to do this is by setting up automated transfers where money gets sent to different accounts or services on a regular basis. This helpful tip builds on the previous one. When you have multiple accounts for different purposes it can be tiresome to have to manually transfer money between accounts all the time. Taking advantage of automated transfer services that most, if not all banking applications offer these days is key to growing your savings without the administrative overhead and because you have worked out how much you can transfer each week or month using tip #1 you can feel good about there being no ambiguity with transferring too much or too little.
Tip #4: Use a Micro-Investment Platform
Remember earlier in that worked example how we ended up with a $2,100 total monthly residual income (TMRI)? Here is where we can start to use it.
When it comes to micro-investment platforms, two of the most popular options out there is Raiz and Spaceship Voyager. I’m not going to go into details about comparing these two platforms, but you can read this article here which aims to do exactly that.
I like the idea behind these micro-investing platforms because it does make it quite easy for anyone to get involved in investing for those with no prior knowledge or experience with doing so. One of the golden rules of investing and part of good financial risk management practice is “only invest what you can afford to lose”, I personally apply this rule for any decision where money is involved.
To put this into another example, let’s decide on using $630 (30%) of that total monthly residual income (TMRI) for micro-investment purposes. This leaves us with $1,470 spare to cover any unexpected expenses that can pop up from time to time.
Now we have $630 to invest and build on each month. Depending on your risk tolerance you may want to invest more aggressively or more conservatively and that is another thing these micro-investment platforms make easy for us to manage. The main idea behind these platforms is that frequent investments over time have the added benefit of being able to take advantage of the wider stock market conditions and increase your overall holdings on a daily basis which can lead to bigger gains.
It is also worth mentioning that adverse market conditions can also result in losses to your overall holdings and this is where the risk factor comes into effect. Always remember the golden rule and never invest what you cannot afford to lose!
I hope the above tips provide some good ideas on how you can start making some small (or large) changes to manage money effectively and boost your monthly savings.
