There are some expenses you simply have no option of cutting back on – rent or mortgage expenses, energy bills, insurance cover and food among them.
Other budget-busting items are not so sacred and, with the help of a little self-control, you can stash more money into your savings.
Here are some smart tips for avoiding unnecessary expenses.
Consolidate your banking
Are you one of the many Australians with multiple bank accounts? Streamlining your banking into one spending account can help you save money, according to a 2013 University of Utah study. Researchers found that having a single bank account enabled people to keep track of money going in and out – helping them spend 10 percent less of their money.
Paul Cooke, senior adviser with Parker Financial Services, agrees that “less is more” and recommends opting for an offset account – a transaction account that is linked to your home loan. Your credit balance is offset daily against your loan balance to reduce the interest you pay on your home loan, which can shave years off the life of your loan and potentially save you tens of thousands of dollars in interest.
Take charge of credit cards
Another trick of the trade recommended by Cooke is to reduce the limit on your credit card. “Once you have a physical barrier to stop you spending over a certain amount it can be a wake-up call,” he says.
And like the danger of having too many bank accounts, Cooke advises sticking to one credit card. “By having multiple credit cards, again you can lose track of how much you are spending.”
Regularly review your expenses
“Most people don’t think about their spending, they just look at the money coming in,” Cooke says. The problem with that approach is that you end up spending more than you should on unnecessary items.
Keeping a record of your spending – start with drawing up a budget – can help you identify any areas of weakness. Perhaps you can cut down from two daily takeaway coffees a day to one – and save more than $1000 a year. Reviewing your expenses and conducting a budget health check a few times a year can help you cut out what you don’t need.
Resist the discount
Remove the temptation to snap up an impulse buy ‘bargain’ by unsubscribing from daily group deal newsletters, or exercising higher levels of self-control. “There are dangers in spending to save money,” Cooke says. “The bottom line is, do you need it and can the purchase be justified?”
Stick to the list
Cooke advises taking a shopping list with you when doing the grocery shopping to eliminate impulse buying. “When I go shopping without a list, I end up buying things we’ve already got or things we don’t need,” he says. “A list can help you be more efficient.”
And stick to cash
Using cash – including EFTPOS or a debit card – when shopping, rather than relying on your credit card, is another smart way to stay on top of your spending. It can act as a reminder to think about every purchase and decide if it’s a necessity or whether you can live without it.