With the start of a new year, many people decide to do something about their finances. Some start with big ideas and others with smaller ones. Either way, a series of smart decisions can keep you on track – let’s face it, most of us can save a little more if we want to by making some of those smart decisions.
What I’m about to say isn’t rocket science but you may still learn a few things from the following suggestions – especially as you try to recover from or overcome the financial hangover from Christmas and the New Year.
We have 10 tips, and will post these over 3 blog posts.
1) Pay off your credit card (and any store cards) debt as quickly as possible
High-interest credit or store card debt is the heaviest financial burden many Australians face. The annual rate of interest you are being charged on the unpaid balance on your credit card is nearly 20% so that’s the rate of return you get — tax- and risk-free — on every dollar you devote to paying down your credit card debt. Doing this will get you to your financial goals faster than almost anything else you can do with your money. (This compares with the average return on Australian shares over the past 10 years that was about 8% per annum.)
TIP: don’t use credit cards for credit (borrowing), use them for goods and services that you’d be using your money for anyway, money that is currently sitting in your savings or mortgage account, making or saving you interest.
2) Some advocate paying cash up front
If you have trouble disciplining your spending on your credit card, paying cash up-front may be the answer. More often than not, though, budgeting problems come from non-essentials, so you can end up with a lot more in your pocket at the end of the day if you stop buying these sorts of items. BUT, many of us spend more when we use a brightly coloured piece of plastic rather than actual cash dollars.
3) Cut out/down on the non-essentials
Let me give you some examples of possible areas for savings:
We complain about paying $1.25 a litre for petrol, but when it comes to paying $2.50 for a 330ml bottle of water some people don’t bat an eyelid. Ditch the bottled water, buy (Buy? I get given so many of these I could start a bottle shop – I’m sure you’re the same – just use one) a reusable bottle and get water out of a tap for free
Cut down on takeaway food – only eat out if it is a special occasion.
Cut down on takeaway coffee – if you buy one $4 coffee every day at work, you could be spending nearly $1,000 a year!
Pack your own lunch for work – buying a 6” Subway and a drink every day at work is costing you about $10 each time. 5 days a week, 48 weeks a year and this is costing you around $2,400 a year!
Make a list before you go grocery shopping. This way you will cut down on your impulse buys! Also, don’t do groceries when you’re hungry. Studies have shown that you are more likely to buy unhealthy or expensive food.
A recent post on Facebook, that sums up this point very nicely, said:
ACCIDENTALLY WENT GROCERY SHOPPING ON AN EMPTY STOMACH. NOW I’M THE PROUD OWNER OF AISLE 4.
Do you really need the gym membership? Gym memberships can be up to $80 a fortnight. If you don’t go – and truthfully, how many times have you been to the gym in the last month? No, no, not how many times are you thinking you may go in the next month (especially after Christmas and New Year’s blow-outs), but actually went, in the last month – you, like many, many others might as well have flushed the money down the toilet. Try going for a run when you are inspired instead – it’s free and the fresh air will do you good. With running all you need to get started is a reasonable pair of shoes – not the top of the range, save those until you are addicted. You really don’t need all the fancy gear, Skins etc. at the start.
Use public transport – it isn’t the most fun, and, yes, ticket prices may be going up, but by far less than the cost of parking, particularly in all the major cities. Or do you use a taxi or Uber – even worse?
Cut down on alcohol and cigarettes. As well as being very bad for you and those around you, alcohol and tobacco products rose more than 7% in the year to June 2014. Buying 2 beers every Friday after work can cost you over $600 a year (Just for two a week – and it is even more if you prefer spirits).
Stay tuned for our next instalment!