My last post dealt with our maxed out credit card balance, and my determination to deal with why we maxed out the credit card, rather than simply accept the bank’s very generous offer of extending our credit limit.
Our problem is we spend more than we earn. It’s a little more complex than that (isn’t it always!) but that’s the gist of it. So I’m looking for about $1000 a month in expenditure savings to balance out the budget. And I want some quick easy wins first…so here’s a list of the big expenditure items in any household budget, and the places I hope to find the first round of savings….
The cost of electricity has sky rocketed in recent years, but I’m not sure what we can do here to gain a quick win. I would love to install some solar panels and take advantage of the rebates on offer, but at a cost of almost $3,000 upfront, it’s just not viable.
So for now, reducing our electricity usage is the only real option. But our heating is from a wood burning stove, and we don’t own a clothes dryer – another big drawer of electricity in the family home, so there is no obvious big wins to be had.
Sure, I can be obsessive over turning off lights and start worrying about phantom loads, but that is not going to give me the kind of quick and big wins I’m looking for in this first round of budget cuts.
We do purchase the wood we burn in the fireplace so one logical place to start is to source some free firewood. We seem to be running at about $50 a week on firewood, so even a week’s worth of free firewood will help.
Food – Groceries
We live about 20 kilometers (about 14 miles) from the nearest major grocery store, in a small village with a population of about 6000. It is really just a bedroom community for one of Australia’s major cities. There are some services here, but they are expensive. Fuel at the local petrol station costs 3c a liter (about 12 cents a gallon) more than in the city. The box of cereal that costs $7 at Woolies or Coles will cost $9 at the local IGA.
I like to support our local businesses and I’m not going to drive 20 kilometers to get only milk or bread, but a bit of planning should make a big difference not only to the cost of our groceries, but also to our fuel bill.
Food – Eating Out
We do eat out twice a week. Friday night at the local pub and then maybe breakfast out on the weekend. I’m hoping to keep these items in our budget for now, but I will be trying to compensate elsewhere in the food budget.
One way is to focus more on budget meals the rest of the week. More vegetarian meals and I’ll be trying out some of Centsable Too’s slow cooker meals. I’m a big fan of goulash, and anything that saves me time is also a bonus.
Food – Growing your own
Last winter I created two “dig” garden beds for vegetables. I basically bought some seeds and planted them. The experiment wasn’t unsuccessful, but it wasn’t as successful as it could have been either. The snow peas, beans and pumpkins all failed.
Over spring and summer we did have a supply of freshly grown spinach, leeks, cabbage and zucchini. Come autumn we had a huge pile of green tomatoes that needed to be picked or be destroyed by the first frost.
I was introduced to no-dig gardening at a sustainable living expo. My “dig” vegetable beds had become overrun with weeds so I figured I had nothing to lose. They were mowed and I built a test raised bed from left over house bricks and whatever we had in the garage and garden (free materials!).
I planted leek and rainbow chard seedlings into the bed a week before heading overseas for 4 weeks. I returned to find a thriving garden producing a far better crop in a month than my dig gardens had all summer. Needless to say I’ve since built another bigger bed.
Producing our own food has already taking some pressure off our monthly food bill, but I’m hoping to step that up even further – despite it being winter and my daughter developing a sudden aversion to broccoli.
I work from home, so I don’t do the commute into town on a daily basis. With limited local services l do need to go into town every so often, though. A quick calculation shows every round trip costs $10 in fuel – minimum. With this in mind, I’ve recently begun reducing those trips.
Another experiment produced interesting results: my ten year old car gets better mileage out of premium fuel. Enough to more than compensate for the higher per liter cost of the premium fuel.
Interest Charges – Credit Cards
As I mentioned in my last post, the last time I checked, $200 of our $1000 a month household budget deficit can be explained by finance or interest charges on our maxed out credit card.
$200 is a lot of money. And it is the cost of not dealing with our budget imbalance sooner. Lesson learned.
There are two ways to reduce the amount of interest we pay on our credit cards:
- Reduce the interest rate and thus the monthly interest charges
- Pay off the balance
Obviously the balance on the credit cards will not reduce while we have a budget deficit each month. There just is no extra money to pay down the balance. So balancing the budget is my first concern.
I can, however, reduce the amount of interest we pay. I can think of two ways to do this immediately. The easiest is to call the bank and ask for an interest rate reduction. For the time it takes to make a phone call I could reduce our interest cost on the credit card by a substantial amount.
The second option is to apply for a new card and take advantage of the outstanding balance transfer offers out there…
Interest Charges – Mortgage
Out of interest I jumped onto my banks website and put in the amount for the average Australian mortgage – $300,000 and using a 20 year term (roughly how long our current mortgage has to run) I chose two different interest rate options.
The results are below:
As you can see, a change to a fixed term can save $178 ($2,343 – $2,165) for the duration of the fixed term (in this case 2 years) but also saves $14 a month after the fixed term!
Of course things are usually a little more complicated than the banks online calculators make out, especially since there are often charges for refinancing, but for a potential $178 a month saving its worth an appointment with my bank. And a mortgage broker.
The mortgage broker will have access to deals available from other banks too. While changing banks is a hassle, so is having no money! And that is where we are headed…
Entitlements – Family Benefits
As much as I hate that a two income family needs to rely on government payments in Australia, it is true. Having lived overseas for much of the last 10 years I feel qualified to comment that the cost of living in Australia is outrageous. But short of moving offshore it’s not easily changed.
If you qualify for the daycare rebate, or any of the myriad of family tax benefits, apply for them. Unfortunately I can’t afford to make a political statement and not take the handouts. Our family budget needs them, so my pride will need to take the dent.
So, there are the high level plans for making a quick dent in our $1000 a month budget deficit. Look for my (hopefully substantial) progress in future posts. And if you can think of any other quick wins to be had in a family budget, please leave your suggestions in the comments box below.