The calls to rein in the federal budget deficit that has blown out to an epic $30 billion have been deafening, especially since the decision was taken to go to the polls on 7 September.
A deficit blowout is never great news, however it seems it’s not only the politicians who need to consider some belt tightening, with one media report suggesting Australians spent a whopping $20.3 billion on purchases in June, with credit limits hitting an all-time high of $139.8 billion.
While this level of spending puts government largess into perspective, there are some smart strategies to keep our personal finances in check.
“Once we pay all our bills, our mortgage and everyday expenses, including one or two cups of coffee, it can feel like our money’s just going up in smoke,” said Paul Clitheroe, founding director of financial planning firm ipac and chairman of the Australia Government Financial Literacy Board.
“Preparing a budget can help as it shows you what you spend, how much you need to cover expenses, and where savings can be made.
“There’s a very useful budget planner on ASIC’s MoneySmart website, which you can download for free. I recommend consumers check it out,” he added.
Lisa Montgomery, CEO of lender Resi, agrees a budget is critical to managing living costs but also urges consumers to slash their discretionary spending.
“A budget will show up the discretionary spending that you might be able to trim back such as paying a cleaner, or doubling up on gym memberships,” said Montgomery.
“Alternatively it could be that you have direct debits that have been coming out of your account for goods and services you mightn’t be using any longer such as a subscription – so it really pays to review all your bank and credit card statements each month to ensure you aren’t haemorrhaging money needlessly.”
Montgomery also advises consumers to audit their outgoings such as high interest charging debts such as credit card debts and personal loans, and to consider consolidating them into a mortgage, which could be charging less than 5 per cent.
“Some people don’t like rolling credit cards and personal loans into a mortgage but it’s a smart thing to do as they come with the lowest interest rates you can access because they’re secured against a very valuable asset, our homes,” says Montgomery.
“There’s a wrong way and right way to consolidate, and you have to be sure to change your spending behaviour, otherwise you’ll be in same position down the track and talking to your lender is always a sensible move.”
It’s also important to check that you’re not paying too much interest on any of your financial products. The difference between the average and lowest interest rate on a $300,000 home loan is around $200 per month, which is clearly no small change. Use a free financial comparison website to compare home loans, credit cards and personal loans among other financial products and see how much you could save.