Wages may be growing faster than inflation, yet research shows one in seven Australian households is spending more than it earns.
Clearly, spending is getting away from many of us. But, just as in business, balancing the household books can help families to boost their income by cutting costs, according to Yellow Brick Road’s Mark Bouris.
Cut housing costs
“I suggest that you start with the largest items in your household budget – and for most, that will be your cost of housing,” he told Fairfax.
Recent ASIC figures suggest just under 20 percent of the average weekly household expenditure is spend on housing; rent, mortgage and maintenance.
“One solution is to refinance into a cheaper mortgage. However, there’s another way to reduce that overhead: try finding several small household savings and putting them back into your mortgage in a monthly payment. You could save thousands.”
RateCity’s home loan calculator shows that a family with a $400,000, 30 year mortgage paying the average variable rate of 5.68 percent could shave almost a year – and $16,838 in payments – off their home loan by making an extra monthly repayment of just $30.
If you’re paying rent that will definitely limit how much money you can free up from a weekly budget. But there are ways to minimise these costs, according to Money magazine’s Maria Bekiaris.
“Consider moving to a smaller place or further away where you will probably pay less rent,” she writes in a column for the magazine. “You could also think about moving in with your parents for a while to avoid rent and boost your savings.”
Turn small savings into big gains
Of course, finding the extra money to save may be easier said than done.
Making small changes, though, such as cutting out take-away coffees and bringing home-made lunches to work, can result in significant savings – particularly if you deposit those savings directly into your mortgage.
One way to take control of your costs is to conduct regular audits on yourself to see where the apparently insignificant costs are occurring, says Bouris. He recommends starting with your phone and internet plans and finding ways to downsize and save.
“Other opportunities to save are out there: shop for packaged holidays rather than buying airfares and hotel rooms separately; reduce the number of times you eat out from, say, twice to once a week and you could save $300 a month; reduce the regularity of your dry cleaning; have either cable TV or DVD rentals – not both; time your petrol refills to the cheapest days, and shop for groceries at a lower-cost supermarket,” he said.
“Just about any household can find $200 a month in savings.”
Add that to your home loan, and you could save more than $90,000 in interest and pay it off five-and-a-half years sooner.