Once you start taking note of your spending, you may be shocked to discover where your money is going.
Having a full understanding of where you are spending your money can help you recognise where you can cut costs and ultimately free up some money. The most practical thing you can do is study every item on your list and become aware of what you’re spending money on, why and how it makes you feel.
We’re not saying cut out every latte (because that would make life miserable), but what we are suggesting is to consider what you value in your spending and adjust it accordingly.
The little things are the easiest to cut from the budget (a takeaway coffee each week or the impulsive shop), but the biggest impact you can make is to decrease your big-ticket expenses (such as housing, food and transportation).
Here’s how you can reduce the cost of those big-ticket items:
1. Reduce the cost of housing
For most of us, housing takes up the biggest chunk of our expenses. Plus, with the rising costs of rent and mortgage interest rates over the past few years, it’s fair to assume that housing now takes up a larger proportion of a household’s expenses.
For most people, the cost of housing is a non-negotiable expense. It’s a fixed cost and it’s at the mercy of interest rates or the landlord’s whim.
However, you could decrease your housing costs by:
- moving to a cheaper area
- getting roommates or moving in with family
- using Airbnb to lease your home while you’re away or travelling
- signing a lease for a longer period at a lower rate to avoid a rental increase in the short term
- negotiating a lower mortgage interest rate
- finding a job that provides accommodation (these are mostly in rural/remote areas).
These options may not be for everyone, but every bit you save on your housing expenses can potentially increase your savings. You can also view some of these options as a temporary way to help you reach your goal.
2. Cut down on food and groceries
In 2010, the cost of a two-litre carton of milk was $2.27. By 2023, we were paying $3.10. While food and groceries will become more expensive over time thanks to inflation, there are ways to reduce this necessary expense.
Meal planning can help cut down grocery bills. When you know what you need to buy, you avoid the temptation that comes with shopping. Alternatively, it may be easier to purchase groceries online, where you’re able to keep track of the actual dollar amount and sort by ‘lowest unit price’ when you select items.
Some supermarkets – like Aldi and Costco – can be cheaper than others. Shopping at these outlets can offer a considerable cost saving when it comes to value for money (although local grocers or butchers are sometimes cheaper when it comes to produce and animal products).
Buying in bulk often saves you more in the long run, but that’s only if you have the room in your budget and home for bulky items – and if you’re actually going to consume them.
Some hacks to reduce the cost of your grocery bill include:
- Bulk cook a meal and freeze it so that it’s available as an alternative to eating out or ordering in
- Cut meat from your diet and substitute it with plant-based protein
- Shop at the end of the day when certain items often go on sale
- Buy marked-down items and freeze them
- Invite friends over instead of dining out
- Dine out with intention, so that it feels like a treat and you don’t feel guilty about spending money
- When dining out, take advantage of lunch specials instead of going out for dinner
- Reduce your use of food delivery services and take advantage of discounts they send when you haven’t ordered in a while
- Use the prompt function on ChatGPT to help you work out a meal plan that is within your budget and easy to cook. For example: I need [# OF MEALS] [MEAL TYPE, e.g. dinner] recipes for [# OF PEOPLE] people. Total cost of the ingredients should be under [$ AMOUNT]. Don’t use more than [#] ingredients per recipe.
3. Save on transportation
Whether it’s travelling for work, to get groceries or to pick up the kids from school, the reality is that it costs money to get around.
But here are some ways you can reduce the cost of transportation:
- Try to negotiate a lower rate or refinance your car loan
- Sell your car and buy a cheaper one (that is safe)
- Attempt to only use one car (if you have two)
- Opt for a bike or motorcycle to get around
- Negotiate working-from-home days to reduce transportation costs
- Choose public transportation over driving (or, if you can, walk)
- Swap petrol for an electric vehicle when purchasing a new car (and look out for any government incentives or rebates)
- Use apps such as My 7-Eleven or Fuel Map Australia to find the cheapest petrol in your area
- Carpool where possible
- Check the price of different rideshare apps and avoid using them during peak times when prices surge
- If you need to pay for parking, see if you can book ahead (this usually saves a lot at airports).
Decreasing expenses can have a compounding effect on your finances. Making small changes by reducing costs can end up saving you hundreds of dollars in the long run.
This is an edited extract from How to not work forever by Natasha Etschmann and Ana Kresina, available at all leading book retailers.
Disclaimer: Any information here is general in nature and has been prepared without considering your personal goals, financial situation, or needs. Because of this, before acting on the general advice, you should consider its appropriateness, having regard to your unique situation. You should obtain and review the Product Disclosure Statement (PDS) and Target Market Determination (TMD) relevant to the product before making any financial product decisions. It’s also strongly encouraged to seek the advice of a professional financial adviser.