Lesson 10 Reduce Your Expenses
How did you go with your meal planning last week? Coming up with a meal plan that works for you and your family will take time - up to three months, depending on how often you shop and how far in advance you plan your meals. But don't give up - it is the key to keeping the grocery bill down without your family even noticing.
This week we are going to explore some simple, almost mindless and painless ways to reduce your everyday expenses and talk about when a bargain really is a bargain and when it's just another debt you've incurred.
Most people who are trying to get out of debt focus on reducing the big expenses: the mortgage, the credit card debt and the other loans. Don't get me wrong, they are good debts to want to be rid of and they will save you lots of money once they are gone and you don't have those interest payments to make so focus on them.
But at the same time, these same people, who are trying so desperately to become debt free, ignore the grocery bill that is a couple of dollars more than the budgeted amount or the phone bill that has crept up or don't count the cost of hairdressers, un-necessary trips in the car and yes, even the obvious: coffee, magazines, eating out and takeaway.
They have a budgeted amount for these things but tend to ignore it if the cost goes over "just a little bit". Their mindset is "It's only a couple of dollars, it doesn't matter". It does! A couple of dollars every week is $104 a year! Add just a couple of dollars to the cost of just five things - groceries, phone bill, petrol, the morning latte and the power bill every week and you are spending an extra $520 a year. That's money that you haven't included in your Spending Plan, that you need to find from somewhere. And that usually means either something doesn't get paid or you resort to credit and incur more debt.
This type of spending is insidious - it seems harmless, and small. But lots of small adds up to a great big amount of dollars. When you hear about saving$2, you might well thing it doesn't matter, it's such an insignificant amount (or so I'm led to believe - I can do a lot with $2).
Break the Savings Down
Did you know that the average food bill for a family of four is between $280 and $400 a week? And that's just the food bill - it doesn't include toiletries, cleaning products, paper products, pet food or any miscellaneous household items such as light bulbs and so on.
If you can cut just 10% from your grocery bill you will have not spent $1,456 - $2,000 over a year! That's a great start. Try switching to cheaper cuts of meat - try oyster blade instead of rump or scotch fillet, buy whole chickens and cut them up yourself rather than buying pieces. Try generics for the things you buy in branded products. If you don't like them you can always switch back.
Do you have Netflix or Stan or Paramount+ or similar? Check the plan you are on - do you really need it? Can you watch all that TV in the time you have? If you can, lower the plan or better still, cancel it. Drop from a Platinum plan to the basic Netflix plan and save $18 a month, or $216 a year!
What about that gym membership? Getting fit is important but is it worth the $60 a month? Especially if you don't use it at least three times a week? Buy a good pair of walking shoes for around $100, cancel the gym membership and save at least $620 a year, more if you've been charging that membership to your credit card!
Three simple changes, and you've already cut $2,292 - $2,836, from your spending!
Don’t stop there, there are plenty more savings to be had.
There's been a lot of talk in the forum about new washing machines. I know only too well how important a good, reliable washing machine is for a family. But when you buy a new washing machine or any other large purchase, perhaps a new computer or a fridge or TV, do you struggle to say no to the extended warranty? Don't bother with the extended warranty on these low-ticket items, it's not worth the extra cost. Yes, a new washing machine is a major purchase. But it's not thousands of dollars, hopefully it will be under $1,500. And it has a warranty from the manufacturer and there are statutory warranties and guarantees too. Add the amount of the extended warranty to your Peace of Mind account. Then, if anything goes wrong with the machine you'll have the money to pay for it or to replace it when the time comes.
Become a single car family. It might sound drastic, but we were a one-car family until the children were grown up, and managed just fine. It won't work for everyone, but seriously look at how much you can save if you only have one car. There will be no registration or insurance, no service costs, no tyres, no fuel bill. You might need to add in public transport fares or extra fuel and wear and tear on the remaining vehicle but those expenses are a fraction of the cost of running a second vehicle. An added benefit of being a one-car household is you'll tend to plan your trips for maximum benefit and stay home more, which usually results in spending less. Look to not spend around $431 a week or $22,412 a year according to Compare the Market.
Cut the bells and whistles on your phone. If you have a mobile phone with all the bells and whistles and a gazillion extras you don't use, get rid of it. If you don't use your phone as a computer, check your plan and drop it down. If you're just making and receiving calls, sending the odd SMS, casually browsing the internet, you don't need to spend a lot on the phone or the plan. Is there a cheaper plan you can be on? Is there a pre-paid plan that will save you money? Ditto your home internet plan. Check your last few bills - have you used all your allowance? Can you drop it down and save some dollars? Is there a cheaper provider that offers the same plan?
There are lots of little, almost insignificant on their own, things you can do to reduce your expenses. Cut down on eating out or takeaway. If you have takeaway regularly, cut back to once a month and enjoy it as a treat. Turn appliances off at the wall. Control the thermostat - turn it up a couple of degrees in summer and down a couple in winter (as a rule in summer our air conditioner is set at 23C and in winter the ducted heating, when we use it, is set at 18C). Have your coffee at home instead of at the coffee shop. Make good use of your library. Take care of the things you have to help them last. Shop at home first. Learn to cook from scratch. Grow as much of your food as you can. Ring your utility companies and get a better deal. Buy in bulk (if the quantity is too much for you split it with a friend). Meal plan, use a shopping list, use portion control and either don't have or plan to use any leftovers - food in the compost is money in the compost!
Turn cost cutting into a game. Get the whole family involved. Brainstorm ways you can reduce your expenses. Calculate the dollar amount for each one then bank the amount in your Emergency Fund to give it a boost (remember, your Emergency Fund should be at least three, preferably six months worth of total living expenses).
When Saving a Dollar Isn't Always the Wisest Choice
Bulk Buys: Believe it or not but there are times when saving a dollar isn't wise. It may even cost you money. I mentioned buying in bulk as a way of reducing costs. That's a great way to save money - if you can use what you buy in a timely fashion. That means buying a 5kg bag of radishes for $2 may be a bargain - but only if you have a use for 5kg of radishes. Otherwise they are going to languish in the fridge and end up as compost. Buying 100 rolls of toilet paper for 25c a roll on the other hand is a good buy. It doesn't go bad or stale and it will be used, even in a one person household. The only problem will be finding somewhere to store it (use your imagination!).
Annual Health Checks: While it may hurt when you pay the bill for your annual dental check, it is a lot cheaper than ignoring your dental health. Delaying dental treatment will only result in very expensive and extensive work, costing thousands of dollars. Spend the $100 or $120 a year and have your teeth checked, cleaned and any maintenance work done immediately.
The same thing applies to your physical health. Book a full physical with your family doctor once a year. Nipping any possible health problems in the bud can save a lot of distress and money in the future. It needn't cost much, look for a doctor who bulk bills and it won't cost you a cent.
Take on just two or three cost cutting tips and you'll be amazed at the amount of money you can save. Stick to them, and before too long cost cutting will be a habit, something you do automatically. You might even find yourself calculating the amount of money you can save every time you go to buy something. As you see your savings grow and your debt disappear, you'll be excited.
Reducing your expenses isn't meant to turn you into a scrooge. That is not the Cheapskates way and it's not the intention of the Saving Revolution. Reducing your expenses is meant to give you the cash you need to pay down your debt and build up your savings so you can live life debt free, cashed up and laughing.
Week 10 Challenge - Track your savings!
You are used to tracking your spending, it gives you an excellent overview of where your money goes. This week, track your savings. When you reduce a cost, make a note of it. When you empty the coins from your purse into your piggy bank, make a note of it. When you buy a cheaper grocery item, make a note of it. See how much you have not spent at the end of the week, and blog about your savings. The add that amount to your Emergency Fund. Remember, money isn't saved until it's safely in the bank. Until then it's just not spent.
This week we are going to explore some simple, almost mindless and painless ways to reduce your everyday expenses and talk about when a bargain really is a bargain and when it's just another debt you've incurred.
Most people who are trying to get out of debt focus on reducing the big expenses: the mortgage, the credit card debt and the other loans. Don't get me wrong, they are good debts to want to be rid of and they will save you lots of money once they are gone and you don't have those interest payments to make so focus on them.
But at the same time, these same people, who are trying so desperately to become debt free, ignore the grocery bill that is a couple of dollars more than the budgeted amount or the phone bill that has crept up or don't count the cost of hairdressers, un-necessary trips in the car and yes, even the obvious: coffee, magazines, eating out and takeaway.
They have a budgeted amount for these things but tend to ignore it if the cost goes over "just a little bit". Their mindset is "It's only a couple of dollars, it doesn't matter". It does! A couple of dollars every week is $104 a year! Add just a couple of dollars to the cost of just five things - groceries, phone bill, petrol, the morning latte and the power bill every week and you are spending an extra $520 a year. That's money that you haven't included in your Spending Plan, that you need to find from somewhere. And that usually means either something doesn't get paid or you resort to credit and incur more debt.
This type of spending is insidious - it seems harmless, and small. But lots of small adds up to a great big amount of dollars. When you hear about saving$2, you might well thing it doesn't matter, it's such an insignificant amount (or so I'm led to believe - I can do a lot with $2).
Break the Savings Down
Did you know that the average food bill for a family of four is between $280 and $400 a week? And that's just the food bill - it doesn't include toiletries, cleaning products, paper products, pet food or any miscellaneous household items such as light bulbs and so on.
If you can cut just 10% from your grocery bill you will have not spent $1,456 - $2,000 over a year! That's a great start. Try switching to cheaper cuts of meat - try oyster blade instead of rump or scotch fillet, buy whole chickens and cut them up yourself rather than buying pieces. Try generics for the things you buy in branded products. If you don't like them you can always switch back.
Do you have Netflix or Stan or Paramount+ or similar? Check the plan you are on - do you really need it? Can you watch all that TV in the time you have? If you can, lower the plan or better still, cancel it. Drop from a Platinum plan to the basic Netflix plan and save $18 a month, or $216 a year!
What about that gym membership? Getting fit is important but is it worth the $60 a month? Especially if you don't use it at least three times a week? Buy a good pair of walking shoes for around $100, cancel the gym membership and save at least $620 a year, more if you've been charging that membership to your credit card!
Three simple changes, and you've already cut $2,292 - $2,836, from your spending!
Don’t stop there, there are plenty more savings to be had.
There's been a lot of talk in the forum about new washing machines. I know only too well how important a good, reliable washing machine is for a family. But when you buy a new washing machine or any other large purchase, perhaps a new computer or a fridge or TV, do you struggle to say no to the extended warranty? Don't bother with the extended warranty on these low-ticket items, it's not worth the extra cost. Yes, a new washing machine is a major purchase. But it's not thousands of dollars, hopefully it will be under $1,500. And it has a warranty from the manufacturer and there are statutory warranties and guarantees too. Add the amount of the extended warranty to your Peace of Mind account. Then, if anything goes wrong with the machine you'll have the money to pay for it or to replace it when the time comes.
Become a single car family. It might sound drastic, but we were a one-car family until the children were grown up, and managed just fine. It won't work for everyone, but seriously look at how much you can save if you only have one car. There will be no registration or insurance, no service costs, no tyres, no fuel bill. You might need to add in public transport fares or extra fuel and wear and tear on the remaining vehicle but those expenses are a fraction of the cost of running a second vehicle. An added benefit of being a one-car household is you'll tend to plan your trips for maximum benefit and stay home more, which usually results in spending less. Look to not spend around $431 a week or $22,412 a year according to Compare the Market.
Cut the bells and whistles on your phone. If you have a mobile phone with all the bells and whistles and a gazillion extras you don't use, get rid of it. If you don't use your phone as a computer, check your plan and drop it down. If you're just making and receiving calls, sending the odd SMS, casually browsing the internet, you don't need to spend a lot on the phone or the plan. Is there a cheaper plan you can be on? Is there a pre-paid plan that will save you money? Ditto your home internet plan. Check your last few bills - have you used all your allowance? Can you drop it down and save some dollars? Is there a cheaper provider that offers the same plan?
There are lots of little, almost insignificant on their own, things you can do to reduce your expenses. Cut down on eating out or takeaway. If you have takeaway regularly, cut back to once a month and enjoy it as a treat. Turn appliances off at the wall. Control the thermostat - turn it up a couple of degrees in summer and down a couple in winter (as a rule in summer our air conditioner is set at 23C and in winter the ducted heating, when we use it, is set at 18C). Have your coffee at home instead of at the coffee shop. Make good use of your library. Take care of the things you have to help them last. Shop at home first. Learn to cook from scratch. Grow as much of your food as you can. Ring your utility companies and get a better deal. Buy in bulk (if the quantity is too much for you split it with a friend). Meal plan, use a shopping list, use portion control and either don't have or plan to use any leftovers - food in the compost is money in the compost!
Turn cost cutting into a game. Get the whole family involved. Brainstorm ways you can reduce your expenses. Calculate the dollar amount for each one then bank the amount in your Emergency Fund to give it a boost (remember, your Emergency Fund should be at least three, preferably six months worth of total living expenses).
When Saving a Dollar Isn't Always the Wisest Choice
Bulk Buys: Believe it or not but there are times when saving a dollar isn't wise. It may even cost you money. I mentioned buying in bulk as a way of reducing costs. That's a great way to save money - if you can use what you buy in a timely fashion. That means buying a 5kg bag of radishes for $2 may be a bargain - but only if you have a use for 5kg of radishes. Otherwise they are going to languish in the fridge and end up as compost. Buying 100 rolls of toilet paper for 25c a roll on the other hand is a good buy. It doesn't go bad or stale and it will be used, even in a one person household. The only problem will be finding somewhere to store it (use your imagination!).
Annual Health Checks: While it may hurt when you pay the bill for your annual dental check, it is a lot cheaper than ignoring your dental health. Delaying dental treatment will only result in very expensive and extensive work, costing thousands of dollars. Spend the $100 or $120 a year and have your teeth checked, cleaned and any maintenance work done immediately.
The same thing applies to your physical health. Book a full physical with your family doctor once a year. Nipping any possible health problems in the bud can save a lot of distress and money in the future. It needn't cost much, look for a doctor who bulk bills and it won't cost you a cent.
Take on just two or three cost cutting tips and you'll be amazed at the amount of money you can save. Stick to them, and before too long cost cutting will be a habit, something you do automatically. You might even find yourself calculating the amount of money you can save every time you go to buy something. As you see your savings grow and your debt disappear, you'll be excited.
Reducing your expenses isn't meant to turn you into a scrooge. That is not the Cheapskates way and it's not the intention of the Saving Revolution. Reducing your expenses is meant to give you the cash you need to pay down your debt and build up your savings so you can live life debt free, cashed up and laughing.
Week 10 Challenge - Track your savings!
You are used to tracking your spending, it gives you an excellent overview of where your money goes. This week, track your savings. When you reduce a cost, make a note of it. When you empty the coins from your purse into your piggy bank, make a note of it. When you buy a cheaper grocery item, make a note of it. See how much you have not spent at the end of the week, and blog about your savings. The add that amount to your Emergency Fund. Remember, money isn't saved until it's safely in the bank. Until then it's just not spent.