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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.au

Supply 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.