How to maximise savings, no matter your income

You've heard the old adage it takes money to make money, right? But does it take money to save money? Not exactly.

It can feel impossible – none of us ever feels overcome with spare money, do we? – but with a careful review of your expenses, you might be surprised at how much you can put away.

In fact, anyone on any income can find ways to trim living expenses, cut frivolous spending and save for a rainy day.

Low-income saving

The rise of ‘spare change’ investment services has made access to the financial markets easier than ever before. More than that, they allow you to save money that you otherwise wouldn’t even notice.

The best of these services pair with your credit and debit cards, and round up your purchases to the nearest dollar, investing what’s left over in a share portfolio.

If you buy a coffee for $3.80, for example, then the service will automatically round up the purchase to $4.00, automatically investing the remaining $0.20 into your investment portfolio. It might not sound like much, but you’d be amazed at how quickly those purchases stack up.

Step one for any low-income saver, though, is to budget wisely. When every dollar counts (and it does), it’s important to know exactly where they’re being spent. Let’s stick with coffee for a moment. One takeaway cuppa a day, at about $3.50, doesn’t sound like much, but adds up to more than $1,200 over the course of a full year.

Medium-income saving

More money earned should mean more money saved. And budgeted correctly, you can actually achieve your financial independence before someone who earns much more than you do.

That’s the idea behind the FIRE (Financial Independence, Retire Early) movement, with its strictest followers pushing to save a whopping 50% of their income. While that might not be possible – or, if we’re honest, much fun – it’s important to remember that the higher your income climbs, the more you should be putting away.

Savings doesn’t just mean a savings account, of course. Anything you do with your money that adds to your net worth (so anything but spending it) counts in the long run, so consider contributing more to your superannuation, paying down your debts, investing in shares or property, or just putting cash aside for a rainy day.

Take a moment to calculate your savings rate, which is simply the amount of money you have left over once your expenses are taken out of your pay. While 50% might seem impossible, 20% or even 30% can be surprisingly achievable.

High-income saving

Tax can be seen as a dirty word in the high-net-worth world, and the more money you earn, the more tax you’ll need to pay – up to 45%. But the taxation system is also set up to reward people who invest their money in their future, and the savings can be massive – as can the impact on your accounts.