As financial planners we get to meet people from all walks of life, from the well heeled to those who have spent their working lives on the shop floor.
A couple I met with many years ago reminded me how some people have the knack of saving money, and others don’t.
He was retired and she was contemplating retirement. Why was she retiring? Well, as she explained, the factory where she had worked for 35 years was moving. She would no longer be able to walk to work but would need to catch two buses.
I asked the usual questions…
What savings did they have? He brought out a yellowing piece of paper covered with numbers written in thick carpenter’s pencil. It amounted to a small fortune held in a variety of bank accounts.
Were they likely to have any one off expenses as they entered retirement (I was thinking of European Grand Tours or new caravans and boats)? Yes, he said, he would like to build a new carport onto the side of the house costing about $1,500. He apologetically explained that perhaps it was a splurge but that he would try to keep the cost down by doing a lot of the work himself.
Their main concern was whether they would be able to generate enough income to provide them with a comfortable retirement. He brought out another piece of paper that listed their annual expenses, a complete budget. A few taps on the calculator confirmed that a well balanced investment portfolio could comfortably produce more than double what they needed.
It occurred to me that the ability to save money is a cultural thing. Almost anyone can do it. Often people on small incomes do it better because they appreciate the value of money, learn to budget, and don’t equate money with happiness.
Some small tips for saving money:
Small changes can make a big difference to your bank balance. Change one thing you do regularly and you could save money. Some examples are:
- Give up drinking coffee or cut down on alcohol – it will save you money and can have health benefits.
- Make your lunch at home.
- Lock up your credit card for a month and only pay for things with cash.
- Set a limit for birthday and Christmas presents or give homemade gifts.
Save on clothes:
- Make sure anything you buy goes with at least two other things in your wardrobe so you can get a few different outfits out of one item.
- Check op-shops and local markets for bargains.
- Take advantage of end-of-season clearances to pay less for the things you need.
Cut your grocery bill:
- Take a shopping list to the supermarket and only buy what’s on the list.
- Plan meals in advance and add the ingredients to your shopping list.
- Set a budget for your shopping trip, withdraw the cash from an ATM and only take this money with you when you go shopping.
- Eat a meal or snack before you go to the supermarket. When you’re not hungry, you tend to buy less food.
- Buy in bulk when things are cheaper. Meat can be cut into smaller portions and frozen so you can use it as you need it.
- If you usually shop each week, try shopping once a fortnight to get into the habit of using all the food in your pantry before buying more.
- Swap the brand names you always buy for generic products when you can.
- Check the ‘use by’ and ‘best before’ dates on food so you don’t waste money buying things you won’t use before you have to throw them out.
- Supermarkets usually promote the items at eye-level, so check the shelves above and below for cheaper alternatives.
- Meat can be expensive, so buy less of it and try making more meals without using it.
Save on electricity, gas and water:
- Turn off appliances at the powerpoint when you’re not using them.
- Dress for the temperature by putting on a jumper and warm socks instead of turning on the heater.
- Avoid using the dryer. Instead, hang your washing outside on sunny days, and use an indoor clothes rack when it’s raining.
- Take shorter showers.
- Install a water efficient showerhead and a dual flush on your toilet.
- Turn off the tap when you brush your teeth.
- Save water to re-use on your garden. Save the water you use when boiling eggs, vegetables or pasta, and use it to water your plants. You can also water your plants with grey water from your washing machine or shower.
- Put a plug in the sink if you’re running the tap to wash dishes by hand or rinse fruit and vegetables.
- Only use the washing machine and the dishwasher when they are full.
- Wash clothes with cold water.
Rein in restaurant meals:
- Cut back on how often you go out for dinner.
- Try cheaper alternatives on the menu.
- Order water instead of expensive drinks.
- Skip the dessert menu and get a cheaper alternative elsewhere.
If you struggle to save money and would like to discuss budgeting with one of our advisers, please contact us.