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The Secret to Slashing your Budget
In times like these, everyone claims to have the answers on how
we can trim the household budget to help make way for the rising
cost of living.
It’s easy to declare that getting rid of the morning espresso,
or buying groceries in bulk from discount warehouses, are the
answers to cutting costs. But what if there’s an easier way? Where
does the bulk of our spending really go?
Write it down
Be warned, this isn’t for the faint hearted. Writing down every
purchase you make – from the impulse snacks at the service station,
to that overdue electricity bill – can be a frightening insight into
your spend-happy lifestyle.
Writing it down is an easy way of documenting these habits. It’s
quite easy, simply carry a small notebook with you and jot down
every single purchase you make over a set period, perhaps two or
four weeks. Make sure you get your partner involved, and be
completely honest with yourselves.
Then, it’s simply a matter of examining the evidence and
identifying your spending habits as well as what you can and can’t
give up. Do you find you spend more if you have more money in your
wallet? Then take out less cash at the ATM. Or are you spending up a
storm on EFTPOS or credit without thinking about the consequences
down the line? Setting limits might be the answer here.
Everyone has different habits and goals, but we could all
benefit from being upfront with ourselves about exactly how much
we’re spending.
The dreaded budget
We do so hate setting budgets and with good cause, we tend to
associate them with living on 2-minute noodles and cans of tuna, and
forgoing all the little (and big) things that make life fun. But it
doesn’t have to be that way.
Many of us simply don’t have enough knowledge of what’s coming
in, what’s going out, and how much is going to be left over. A
budget gets it all out in the open and allows us to plan our
expenditure better. Keen for a holiday to the Gold Coast? Well maybe
giving up the sports channel on pay TV for three months can make it
happen. Want to pay off that expensive store card sooner? Perhaps
finding some additional temporary work is the answer.
The main reason budgets fail is because they’re not realistic.
There’s no point clamping down on every little luxury, as like an
over-restrictive diet, it’s not going to last for very long. The key
is to work out which luxuries are worth keeping, and which you can
do without.
And to make the job even easier there are a number of ready-made
budgets available to guide you through the process. ASIC has a great
one which you can download for free at
http://www.fido.gov.auSupply and demand
Successful businesses don’t let their suppliers rest on their
laurels once they’ve agreed to hire them. They constantly examine
their contracts in line with market expectations to ensure they’re
getting a good deal.
Some of the biggest savings can be made in negotiating mobile
phone, landline and broadband deals. Shop around, play the suppliers
off against each other, and take notice of when the contract ends to
ensure you can chase the next great deal.
Similarly, don’t let your insurance premiums roll on year after
year without examining what else is around to make sure you get the
best deal on health, home, contents and car insurance.
Go through all of your suppliers as indicated on your household
budget and systematically make sure they’re making the most of your
loyalty. The amounts you save may surprise you!
To your credit
There’s no doubting that we Australians love our credit cards.
As a nation, we’re sitting on a record $42 billion in credit card
debt!
Used correctly, credit cards are a great convenience allowing us
to shop online, benefit from loyalty points programs and purchase
items to be used in advance, by paying them off over time. But when
used incorrectly, credit cards can wreak havoc on our financial, and
emotional, welfare.
The first step is to make sure you have the right credit card
for your needs. If you have no problems paying off your balance in
full by the end of each month, then one with an ‘interest free’
period may be ideal for you. If you do find you have a balance left
over each month, then perhaps you’re better off on a low-interest
card, or even a debit card which allows you to access the online and
global shopping power of a credit card, only by spending your own
money.
Another major money black hole is store credit cards. As with
bank cards, when used correctly interest free deals are a great way
of purchasing large items and paying them off over a period of time.
But if they aren’t paid off on time, these store credit facilities
often have exorbitant interest rates, far higher than any bank,
which can quickly and significantly add a huge price to the tag on
that three-piece suite. Read the fine print, understand what you’re
getting into and to avoid extra costs pay off the full amount before
any interest free period ends.
Speak to the professionals
Depending upon your circumstances, you may not be making the
most of potential tax offsets and government assistances all able to
free up precious dollars.
Your financial planner and/or accountant can work with you to
identify strategies which may attract social welfare benefits, tax
deductions and offsets and other tips not widely known by the
average person. They may also be able find other opportunities to
take the pressure off your cash flow, such as holding your personal
insurances through your super fund.
Speak to the professionals and reap the benefits of their years
of experience when balancing the household budget this year.
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