Wednesday, 2 April 2014

A-Z Simple Living: B = Budget

I chose this word for my next simple living topic because the logic behind a move towards sustainable or simple living, is to ultimately save money. I have made significant changes to reduce my cost of living, and those savings are currently being re-invested in infrastructure required to produce further savings...I have found that you need to have a mixture of long term and short term financial goals in order to see some immediate rewards.

Budgeting is not a big strength of mine, despite the fact that I work with figures and numbers every the plumber with a leaky toilet :) I find that, with teenage children, there are so many variables that are not accounted for and my budgets have always tended to run in deficit. Still, I do have a plan that I stick to every fortnight when I get paid, and these are some of the things I first did that helped me to reduce my expenses:

I made a list of all of my fixed expenses such as mortgage, insurance, car registration, electricity, groceries, credit cards etc. I then brought all of these expenses down to a weekly figure ie. monthly credit card payment multiplied by 12 then divided by 52. I tallied all of these up and deducted them from my net income, leaving a surplus amount for variable expenses such as school excursions, medical expenses etc.

I then had a look at everything I was paying, and investigated whether I could save any money on those fixed expenses. This is what I came up with, which I have posted about previously Focus on Financial Balance:

  • Mortgage - I weighed up various options and found our rate and the fees were very competitive but I did ring our bank and tell them I was looking at other offers...and they reduced our rate by .25% over the phone. 
  • Credit cards - I transferred our outstanding balances to a 0% for 12 months credit card - a massive saving over $1,000 in interest. The interest rate after the interest free period is also 5% lower so there are ongoing savings.
  • Insurance - I got quotes, and bundled all our insurances together to get a bulk discount - this saved $500/year
  • Electricity - we took advantage of the Solar offer of 44c feed in tariff. Origin offered us an extra 6c on top of that because we bought the panels through them. I then joined the One Big Switch campaign and Click Energy offered us an extra 2c on top of that. So we have a 52c feed in tariff, and even though we are paying our solar panels off for two years at $300/month, we have no electricity bills and are actually $150 in credit. So, when we pay the panels off...we will be $2,500 a year in front.
  • Groceries are our second biggest expense and I set myself a goal to reduce our bill by $50/week to just $150. This has been my second biggest saving...a massive $2,500/year. In this post How to save money on groceries I outline 20 different ways you can save money. The biggest saving for me is in making my own cleaning products which save me around $10/week or $500/year.

Everyone has a different situation and the above outline is only an example of where I started, in examining my finances. A useful website I have found that has great money saving and budgeting tips is Simple Savings. They even have a link to a budget that you can use to plan ten years in advance...which I have put on my list of things to investigate.

As well as reducing the cost of my existing expenses I am also working on my variable ones, for example reducing my personal spending and putting the surplus into a savings account. I buy less luxury items, and always look for the most economical alternative. For example, I used to spend hundreds of dollars at a time on skincare. I have now found that organic brands such as Sukin work fantastically well for about 20% of the price. I also know people who make their own skin care products which may be something I venture into down the track...the homemade bug is addictive once it takes hold :)

Have you given your budget an overhaul lately? Where have you managed to save money?

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