We all know that saving money has a direct effect on how secure we feel. But how much can we really put aside? Many sources advise saving 20%. But quick reality check shows that it is not a one-size-fits-all situation. If you are a high earner, for example, you can probably save a lot more. But if 20% seems to be impossible at the moment, saving something is still better than nothing.

Having a look at your savings goals is a great place to start. You’ll need to save money for: 

• Short-term goals (expenses with less than a year) 

These savings can be for your vacations, an emergency fund in case something goes wrong, unexpected appliance replacements, for example.  

• Medium-term goals (within less than a decade) 

This money can be for a new car, a new deposit, or a home renovation.  

Most of us have eyes bigger than our stomach. Yes, a new kitchen would be nice, so would a car, but is it worth more than missing an overseas trip for three consecutive years? By setting deadlines and cost estimates for your goals, you’ll see where you can downsize, move, or change your goals against the realities of your income.  

Here are the following steps: 

• Figure out exactly what you could save every month, and how that lines up with your short and medium-term savings goals. You may need to reconstruct your goals and amounts to fit with the realities of your life. 

• Keep in mind the one non-negotiable thing: your emergency fund. Regardless of what you’re spending on, make sure you always try to have at least three months’ worth of bills and expenses on hand for the unexpected. Then, check in on your emergency fund yearly, to accommodate rises in the cost of living and new financial obligations.  

• Don’t overlook the more distant future. As much as it’s saving for a time so far in the future that many can find it alien, retirement savings are the best determinate of wellbeing in later life. Many financial professionals suggest siphoning between 10% and 15% of your income towards it, which for many New Zealanders may sound unattainable. Still, that rate can be affected by numerous circumstances, such as how much you earn and when you begin saving. 

The best way to maintain long term retirement for New Zealand is bettering your KiwiSaver investment — 3% will replace less than half of your income in retirement, making that 6% is a foolproof means to keep your same lifestyle after you finish your career. 

4. Overcome the common barriers to money-saving 

There are many common barriers that can prevent people from saving money, but with practical steps, you can try and overcome these obstacles.

Here are some key barriers to watch out for: 

• Lack of budget: As we’ve seen, the first step to saving money is to create a clear and, most importantly, realistic budget. Without it, it can be easy to overspend and have little left over for savings.  

• High expenses: If your expenses are high, it can be difficult to save money. Of course, not every expense can be reduced, but you’ll be surprised at the difference that a few key cuts here and there can make over time. Consider switching providers, cooking meals at home instead of eating out, or cancelling subscriptions you don’t use. You can also look for ways to earn extra income, like taking on a part-time job (if you have time!) or selling items you no longer need. 

• Debt: Another major barrier to saving money is having high-interest debt, such a credit card. That’s why it’s important to pay it off as soon as possible. Many people use the ‘debt snowball method’: essentially, you pay off your smallest debt first and then apply that payment to the next smallest debt. This strategy can help you build momentum and pay off your debts more quickly. 

• Lack of discipline: Yes, saving money requires discipline. One way to streamline your efforts is to automate your savings. If you set up automatic transfers from your main bank account to your savings account each month, you won’t have to think about saving money: it will happen automatically.  

• Impulse buying: Do you often find yourself buying things out of impulse? Treating yourself every now and then is not a bad thing per se, but it becomes a problem if it consistently derails tour savings goals. To avoid the temptation, create a shopping list before you head to the supermarket or go shopping – and of course, stick to it. Another good idea is to give yourself a waiting period before making a purchase: if you still want the item after a few days, you can consider buying it.