We have to save more! We have to cut costs! Easier said than done. And having to think about money all the time certainly sounds dull and difficult. However, talking to Susanne Arvidsson about saving and budgeting is not dull at all. She has a positive view on saving, and makes it sound easy.
Susanne is an associate professor of business administration specialising in finance at Lund University’s School of Economics and Management. As the expert she is, she now wants to share her best savings tips with us. Smart, insightful and strategic. Imagine if 2018 could be your best financial year to date!
Susanne is the mother of two young children, and a homeowner. Like most people, she has monthly expenses and needs to plan her spending. However, the difference is that Susanne seems to have a clearer picture of and a smarter strategy for her personal finances than most.
“Save on the small stuff, and the big stuff will save itself”, says Susanne. “By becoming aware of how many small but frequently recurring purchases you make, you can save a lot of money. Most people think carefully before making big purchases, but we overlook the small expenses, thinking that they don’t require the same consideration. We feel we can afford to treat ourselves to things that are cheap. Just think about what it’s like when we go to IKEA. We may have gone there with the intention of buying a mirror but along the narrow winding paths we see many fairly inexpensive things that we stuff into our shopping bag with ease. At the checkout counter, we are stunned by how much we end up having to pay. They were only a few cheap handy items. This is a good illustration of every penny counts....”
Is it necessary to keep a written account of all expenditures?
“It can be very helpful to draw up a monthly budget and to keep a record. Set interim goals and monitor your savings. This will make it a lot easier for you to track your spending. The consumption pattern becomes clear. Much of it has to do with becoming aware of your household’s cash flow”, says Susanne.
Isn’t saving a bore?
“No, I don’t think so. Making a priority list of what the household needs or what you would like to buy that year can be quite fun. And you don’t have to save all that quickly. Once you’ve begun saving, you can always decide to save more. If your household does not have a buffer for unforeseen expenses or loss of income, replenishing this buffer is the most important allocation of your savings. It can reduce stress, which is a good thing”, says Susanne.
Susanne’s best savings tips:1. Draw up a budget
Make a habit of drawing up an annual budget. Break it down into months to identify the times during the year when there are many simultaneous expenses. For such occasions, it is important to have saved a little extra to cover the costs. I recommend that you and your whole family draw up the budget together.
2. Create a savings plan
To help you get started on your savings, begin by setting final and interim savings goals. Most people feel immediate satisfaction from seeing the positive effects of when their savings begin to grow. Save towards something you and your family have dreamed about. Make a priority list for what the savings are to be used for – but first, read the next tip....
3. Build a buffer
For sustainable and long-term saving, having a buffer is key. Far too many Swedish households do not have a sufficient budget to cover unforeseen expenses in the order of SEK 10 000.
4. Pay off your mortgage
Whenever you can afford it, this is step 1. You can save money right away from having lower interest costs. Additionally, and perhaps more importantly, it will improve your ability to cope with expected future interest rate hikes.
5. Review all contracts, memberships and subscriptions
Power supply contracts, mobile phone plans, broadband subscriptions, gym memberships, newspaper/magazine subscriptions. Today, many households are tied to expensive service contracts, some of which may be unnecessary due to limited use. Either way, you should compare the various options on the market on a regular basis. There’s money to be saved here!
6. Review your insurance
This also applies to insurance, as the insurance premiums can differ significantly from one company to another. Then again, so do their insurance terms. Therefore, it is important to act cautiously so as not to reduce your coverage.
7. Chose bonds with low fees
This is especially important if you have a long-term savings plan. You could end up saving an extra several thousand crowns.
8. Keep track of your small impulse expenditures
Large and recurring expenses are recorded in the budget. Small expenses, on the other hand, are just as treacherous as that extra piece of cake is for your diet. That cup of coffee in town, the smoothie on your way home from work, or things you order online as you snuggle up on the couch – together they amount to a fairly large expense in many household economies, especially if your kids are a bit older. There are often plenty of savings to be made in these areas, as long as you are willing to change your consumption pattern.
9. Pack your own lunch
A good way to reduce your living expenses is to bring your own lunch to work, at least a couple of days a week. Not only will you save money, it will help you keep better track of what you eat and waste less food by using any leftovers. Other food-related savings tips are never to buy ready meals and never to shop when you’re hungry. A weekly meal plan can also help you save money and time!
10. Walk or cycle when travelling short distances
This is not only good for your wallet but it also helps keep you in shape and get enough vitamin D. It’s significantly cheaper than a gym membership! Furthermore, now you can apply for a grant for purchasing an electric bicycle.
11. Reuse, recycle, sort out and sell, share ownership
Think in a new way! Buy second-hand. Borrow children’s clothes and gowns from each other. Sort out your attic, basement and wardrobe. Here, most people will find things which have never been used and that can be sold. And you don’t have to own everything yourself. Team up with your neighbours to purchase a hedge trimmer, lawn mower or drilling equipment.
12. Have fun!
Last but not least, try to change your attitude to make saving into something fun. Feel the joy of watching your savings grow. Move from immediate consumption to strategic consumption. And never borrow for consumption.
Text: Anna Löthman and Susanne Arvidsson
Photo: Anna Löthman