After years of living on a double income we got very used to eating out, Gold Class movie tickets, travel (including our honeymoon overseas) and more. My husband and I were very good at spending money, not so good at saving money.
Now that we are down to one and a bit wages since having our daughter, naturally the nights out, travel and regular trips to the movies are becoming more of a thing of the past.
Further to this, we have now made the decision that I will not return to full time work and instead focus on staying at home to raise our daughter. This has been the catalyst to push us towards re-evaluating our living expenses and trying to find ways to save money.
To us, we are living by the mantra ‘the less we spend, the less we have to earn’.
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Here starts our ‘challenge every expense plan’
I say ‘our plan’ but my wonderful husband doesn’t enjoy budgeting, spreadsheets, Money Magazine and finance blogs like I do – so instead it’s on me to do the research, fill him in on my findings and work to implement strategies to save us money (he may get a shock when Netflix simply stops working!).
To begin with, I will be reviewing our joint expenses in totality to fully understand just how much of our money is heading outbound. This will help me also start to showcase and motivate him to participate in my new found thinking. It’s hard for people to have the same level of motivation as you when they are busy focusing on other aspects of life.
The 3 step ‘challenge every expense’ plan
To make this challenge easier, I have broken it down into three core components to save maximum money. The goal is to review frequent expenses, sneaky spending habits and establish new ways to save money by trimming them back (or finding a much better deal).
Step 1: List every expense (aka bill) that occurs weekly, fortnightly, monthly and yearly
Regular expenses and bills really add up. We often have numerous little outgoings that do not seem significant, but end up significantly contributing over the course of a year towards reduced cash flow.
Listing your regular expenses enables you to find a starting place to ‘challenge’. To do this, I’ve reviewed our bank statements, credit card bills and direct debits to list all of our outgoings (while excluding larger ticket items like council rates and body corporate fees which I track in my master Budget Spreadsheet).
|Income protection (mine):||$82|
|Income protection (hubby)||$82|
Step 2: Sorting your list of expenses and making a plan to ‘challenge’ them
Using your list of regular expenses, begin by assessing which items are required and whether or not there is wiggle room to challenge them, reduce their cost or simply cancel.
- Mortgage: we need this, potential to find a cheaper loan.
- Groceries: we need to eat, potential to optimise shopping budget.
- Petrol: we need to drive (bad bus coverage), not much wiggle room.
- Mobiles: we need these, but open to review our plans to cut costs.
- Internet: a good deal already, husband works for a telco.
- Health Insurance: necessary as we have a family.
- Netflix: we enjoy this, bit of a tough one!
- Stan: we don’t watch often, more expensive than Netflix (with less value).
- Swimming lessons: our daughter’s swimming lessons we see as important.
- My income protection insurance: can cancel, due to me not working.
- Husband’s income protection insurance: will keep as we rely on his wage.
Looking at my notes above, I’ve found that I can cancel our Stan subscription (which would save us $144 per year) as well as my income protection insurance (which will save us $984 a year).
As you can see, in the space of 10 minutes I‘ve been able to put over $1,000 back in our pockets per year.
Step 3: Time to find a better deal on the other items
Now I’ve seen what we’ll be keeping it’s time to search for a better deal.
Our mortgage: we are now looking at low rate operator that has the potential to save us $1,000’s per year for a small switch over fee. We may also consider going interest only for a little while to minimise the cost (while still trying to pay above that to not go backwards). Our rough figures indicate a saving of $8,000+ per year!
Our groceries: we are now looking at splitting our shopping between one of the major supermarkets and ALDI to reduce the costs by 30%. That’s $150 per month, $1,800 per year.
Mobiles: we are both paying for our handsets as part of the plan. As soon as our contracts end, we will be continuing the plans without these charges and looking to reduce the costs ongoing by keeping our current phones and finding a cheaper plan. So many people continue to pay the ‘with handset’ price even after they don’t have to.
Health insurance: we see this as vital, though we are going to start reviewing the costs and compare them against other providers to see whether we can get a better deal. A quick online comparison leads me to believe there is at least a few hundred dollars per year in savings to be had.
Summary of savings after ‘challenging every expense’
My challenge every expense plan will see us save $9,168 in outgoings this year or $764 per month.
Why not do the challenge yourself and see how much you can save this year? Use the savings to pay down ‘bad debts’ or invest in something that will grow your money.