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Real Living Australia

MONEY MOVES TO MAKE

1 WORK OUT YOUR DEBT LOAD The formula is simple and it gives you a good idea as to how much debt you have compared to how much you earn. Simply divide your total debts (this includes your rent or mortgage, minimum credit card repayments and loans) by your total income and then convert that decimal to a percentage. Let’s say your monthly household income is $6500 and your monthly payments on your debt load totals $3000. Divide $3000 by $6500 and you get 0.46 (or 46%). Ideally you want to stay south of 40%.

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2 DO A BUDGET Highlight your expenses, negotiate with your providers and monitor your cash flow. If doing a budget is too painful, ask your bank for a list of your direct debits or periodical payments. Chances are a handful of regular bills are eating up your pay. Home loans can bring about the greatest savings. The difference between the cheapest variable home loan interest rate and the dearest is a massive 2.34%. On a $500,000 mortgage over 25 years that equates to over $721 extra in monthly repayments. Check your current rate and ask your lender for a better deal – or see if taking your business elsewhere will deliver savings.

3 AVOID WINTER BILL SHOCKS We spend an average $1700 a year on electricity, which means there’s plenty of room to save. Head to Energymadeeasy.gov.au to see if you’re getting the best deal or if you could save by switching to a different retailer. Some energy providers offer fixed-rate contracts that let you lock in the price, typically for two years. Usually the tariffs on fixed plans are slightly higher than those on variable plans. Fixing can work out cheaper than variable rate deals as there’s often a discounted incentive to lock in. The downside is you’re taking a gamble on how power prices will move in the future. Watch out for fees that apply if you bail out of a fixed-price contract early.

4 MAKE TALK CHEAP We spend an average of $77 a month on mobile plans – more than double the average spent on prepaid plans, so it may pay to hang onto your old phone and switch to a prepaid plan. Most phone plans now include unlimited talk and text – it’s the data that you need to keep an eye on. If you’re having trouble managing your bill it’s worth checking to see if your provider offers a usage app that you can download to see your real-time usage.

5 SET UP SOME SAVING BUCKETS There’s no shortage of budget formulas to grow savings, and a popular option is the 70:20:10 plan. Another is the 60:20:20 budget plan. Here’s how it works. You divide your money between: • 70% for everyday living costs (rent or home loan, transport, clothing, food and utilities); • 20% for savings; • 10% for splurging. The 20% can be further broken down between savings buckets – 5% can go to your rainy day bucket, 10% for your holiday bucket, and 5% for the “get ahead” bucket.

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