A dollar saved is a dollar earned
You know the cost of living is rising when a standard topic of conversation is how to earn more money.
The Reserve Bank and ABS both tell us that wages growth has been strong in recent years, but a lot of people tell me that it’s getting harder to make household earnings cover all the things they used to cover.
I have a quick solution to this problem. It’s old-fashioned – it was around when I was a child – and it essentially says that a penny saved is as good as a penny earned.
Whether you’re saving for a goal or wanting a better safety net for your mortgage or rent payments, a good way to flush out more cash is to look for savings. Just as you occasionally have to clear out the garage or the basement and get rid of all your excess stuff, making an audit of your outgoings is always rewarding and is something you should do at least once a year.
The best thing about this approach is that technology is now on your side. In many cases, others have done the hard work for you.
You could start with your mortgage payments: is it the best home loan? Could you pay less elsewhere? Would you pay less in interest if you started paying fortnightly?
You can use an online comparison service like Canstar, or go to a broker and get them to find you the best loan. It’s worth doing this, and it’s not unusual for a person who switches mortgage to save more than $100 a month.
Another expense that people tend to set and forget is insurance. When you sit down and go through all of your policies, I bet you’ll find insurance you no longer need, premiums that are too high and premiums that are wrong because your status has changed.
The average household has around six insurance policies, and I’m sure you can find savings of at least $100 a month by spending an hour ringing the company and negotiating for a better deal.
If you don’t feel you can do this, use one of the online comparison sites or go to an insurance broker and ask them to streamline your insurance. Just about everyone who does this saves money.
OK, so now you’ve saved $200 a month on financial services. Now, have a look at utilities. With power and gas, there are some excellent comparison websites where you can input your current provider, usage and tariff and the service will return you a provider and a plan that you should be on.
There are people saving $50 a month by using these sites, so why aren’t you on the right power and gas plan?
The same goes for phone and internet plans. Most of the bundled call and data plans run for two years, and you’re a mug if you don’t at least shop around when the end of the two years is up.
I’ve seen differences of $20 and $30 per month for the same deal. So why keep paying more when you can pay less?
The same goes for cable TV. If you take the full package but you hardly watch a third of the channels you’ve ordered, why not cut it back to the option that’s $20 cheaper?
Once you’ve looked hard at utilities, look at your grocery bill. Most people shop at the supermarket that’s closest to their home or their work. But these are not always the cheapest. There are many cut-price supermarkets: you may have to bring your own bag and put up with a smaller selection. But if you can save $100 a month by going to a different supermarket, it’s worth it.
These are the most obvious monthly overheads that most households have to spend on, yet I’ve identified a conservative $400 per month in savings. If you’ve never done this before, it could be greater than that.
The money you don’t send to insurance companies and banks, phone companies and supermarkets instead finds its way back into your wallet.
It’s as good as money earned, but you didn’t need a second job to do it.
Mark Bouris is executive chairman of Yellow Brick Road, a financial services company offering home loans, financial planning, accounting and tax, and insurance.