Savvy Australia-based entrepreneur and author Rachel Smith, 40, managed to save herself an impressive $52,000 AUD (about $38,500 USD) in one year just by changing a few simple habits. After spending mindlessly on things she didn’t really need, Smith found that she was wasting tens of thousands of dollars annually.
But a life-changing trip to India changed her perspective and gave her the tools she needed to curb her spending habits. “These cities based their lives around more sharing and less waste,” Smith said. “With less food security than I had at home, I was exposed to the sharing economy and not needing all this stuff. In Mumbai, I was shown around some of the poorest lands in the world where they use everything and value the little that they have. Every piece of waste has a new purpose.”
It was this realization that led Smith to write down every single thing she was spending her money on and take stock of what was really important to her. “On New Year’s Eve, I made the decision [that] I wasn’t going to buy anything new or second hand for 12 months, and see how much I would save.”
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“For example, you might be buying lunch every day and shopping in Zara when what you really want to do is go on [vacation]. If you realize exactly where your money is going, you can cut down where you need to and save for that dream purchase,” Smith explains. That’s exactly what she did, and in just 12 months, she saved enough money to put a deposit down on her dream home.
“There were reasons for my impulse shopping,” she explained. “I’d reward myself for working long hours. I was earning more than ever, but also working longer hours. So I would treat myself to new clothes or simply go shop. But once I identified what was important to me, I made sure I created all these different bank accounts: One for bills, one for fun purchases — such as my hobby, horseback riding — and another for saving. That way you never spend more than you have,” Smith advises.
“Before I didn’t have a record of what I was buying,” she said. “It’s so easy to do…and most of us have no idea how much we spend on a daily, weekly, or monthly basis. Eight percent of us don’t keep a record. It’s just part of the daily habit. Now, if I want to buy something new, I will write it down and have a waiting list which shows the item, price, and the date which I can buy it. I quite often find myself not wanting it by the time the date rolls around.”
Smith also advises to swap or borrow things you need on an ad hoc basis such as camping gear or extra chairs for entertaining. “And if you can get your friends to pass on kids’ hand-me-downs or used books, you can save money this way.”
Now she uses her intel to help others improve their spending habits. “After that first year, I had saved over $52,000. So I thought, this is a great time to write [my] book, Underspent ($2.99, Amazon), and share my story, because after that redundancy, a lot of my colleagues were highly stressed because they had zero savings.”
This post was originally written by Faye James. For more, check out our sister site, Now to Love.