Amid the COVID-19 crisis, which has caused many Australians significant financial stress, why not challenge yourself and see how much you can save for the rest of the year? Use your savings to pay down ‘bad debts’ or invest in something that will grow your money.
Some live by the mantra ‘the less I spend, the less I have to earn’ to help them understand just how much of their money is heading outbound. It’s hard for people to have the same level of motivation when they are busy focusing on other aspects of life. However, I have broken it down into three core components to save maximum money. Ultimately, the goal is to review daily expenses, sneaky spending habits, and establish new ways to save money by trimming them back (or finding a better deal).
Here is my 3-step ‘challenge every expense’ plan:
STEP 1: List every recurring expense that occurs weekly, fortnightly, monthly, and yearly.
Regular expenses and bills add up. We often have numerous little outgoings that do not seem significant but end up contributing over a year towards reduced cash flow.
Listing your regular expenses enables you to find a starting place to ‘challenge’ them. To do this, review bank statements, credit card bills and direct debits to list all of your outgoings (while excluding larger ticket items like council rates.
STEP 2: Sort your list of expenses and make a plan to ‘challenge’ them.
Using your list of regular expenses, begin by assessing which items are required and whether or not there is wiggle room to challenge them, reduce their cost, or simply cancel.
Here are some common expenses people have and what their thinking may be:
Mortgage: I need this, though there is the potential to find a cheaper loan.
Groceries: I need to eat, but there is the potential to optimise shopping budget.
Petrol: I need to drive, so not much wiggle room.
Mobile: I need this, but I am open to reviewing my plan to cut costs.
Internet: A good deal already.
Health insurance: Necessary, especially as I have a family, but I could find a cheaper policy.
Netflix: I enjoy this too much.
Stan: I don’t watch often, and it’s more expensive than Netflix (with less value).
Swimming lessons: our child’s swimming lessons are important.
My income protection insurance: potentially pause*, due to me not working.
Husband’s income protection insurance: will keep as we rely on his wage.
Based on the above, an individual may be able to cancel their Stan subscription, which would save them $144 per year, as well as seek advice from their financial advisor about *pausing their income protection insurance if they aren’t working, potentially saving them up to $984 a year.
In the space of just 10-minutes, you could put more than $1,000 back in your pocket per year.
STEP 3: Find a better deal on the other items.
Now that you’ve analysed what you’ll be keeping, it’s time to search for a better deal.
Mortgage. Look for a low-rate lender that has the potential to save you thousands per year for a small switch over fee. The cash rate is currently at 0.25 per cent low, so find a new home loan on a competitive rate. You could also consider going interest-only for a little while to minimise the cost (while still trying to pay above that to not go backwards). Depending on the size of your mortgage and the interest rate on your loan, you could save $8,000-plus per year.
Groceries. Split your shopping between one of the major supermarkets and ALDI, to reduce costs by 30 per cent. That’s around $150 per month, equating to $1800 per year.
Mobiles. A lot of partners both pay for their handsets as part of a mobile phone plan. If this is you, as soon as you get to the end of your contract, consider continuing the plans without these charges and look to reduce the costs by keeping your current phones and finding a cheaper plan. A lot of people continue to pay the ‘with handset’ price even after they don’t have to.
Health insurance. Many see this as vital, especially since the COVID-19 outbreak. However, if you are going to start reviewing the costs of your health insurance, compare it against other providers to see whether they can get you a better deal. A quick online comparison can reveal there is at least a few hundred dollars per year in savings to be had.
As you can see, my ‘challenge every expense’ plan could help you save around $9168 in outgoings this year, or $764 per month. You could be seeing even more savings, based on your own circumstances. That’s hard to pass up on!
By Helen Baker, financial adviser, author, speaker and spokesperson for online finance information platform Money.com.au. Helen has a passion for empowering Aussies to find financial freedom through strategic planning and goals-based financial advice. For more information, visit www.money.com.au
