Budgeting on the Brink

Australia has again become a nation of savers, according to the Reserve Bank. The GFC, higher living costs and continued uncertainty around interest rates have prompted many of us to pay more off our mortgages or fill our piggy banks. Apparently we are now squirreling away about 10 per cent of our disposable income, our highest savings rate in 20 years. But how are you meant to stash some cash if you're still spending everything or more than you earn? Don't despair. Haven has some tips to help you budget, even when you're broke.

BILLS: This is your starting point. The longer you ignore paying bills, the harder it is to get out of debt and into savings. Prioritise bills by their due dates and set up a schedule to have them debited from your bank account when you get paid. If you're already behind, contact your billers and set up a realistic payment plan, again with the funds debited from your account on pay day. If you have a few big bills that always arrive around the same time, chunk them down by setting up small direct debits for each pay day. By the time the bills are normally due, you will just about have them paid.

SAVINGS: Contrary to the nation's newfound habits, those struggling to get out of debt should forget about saving for now. It may sound like irresponsible advice, but you are actually going backwards financially if you are socking away funds instead of paying down debt on credit cards or non-depreciating assets, such as cars. To get back on an even keel, schedule to have more than the required minimum repayment debited from your bank account each month, and then pay off more again with anything left over from your budget. Essentially, you will be using your ‘savings' to pay down bad debt. Once you have your unhealthy debt under control, you can join all those super savers who are putting away 10 per cent of their disposable income.

GROCERIES: Supermarket aisles can crucify a budget, unless you're equipped with two things: a meal plan and a list. The Australia Institute reckons the average household bins more than $600 of food a year. While most of this comes from our fridges, there are also countless cans, jars and packets of non-perishables sitting idle in pantries. The bottom line: stop buying things you don't need! Make a meal plan for the entire week, including snacks and lunches, and check your fridge and pantry to see what's already on hand. Add to your food list only those items you need for your plan. Stick to the list when you shop and you will save.

SHOP AROUND: It takes time but looking around for better deals can reap big rewards. Start by shopping around on the following household expenses: Home loan Talk to your broker to see if you can get a better rate on your home loan. A 0.5% saving in interest on a $300,000 loan puts $1,500 in your pocket each year, instead of the bank's. Car and home insurance Increased competition around car insurance means savings. If unhappy with your premium, shop around for a better deal. But before you take it, go back to your insurer to ask if they can better it. Chances are they will come to the party. Home insurance is not quite as competitive, thanks to the increased cost of natural disasters, but you can save significantly on your premium by increasing your excess, if you don't mind paying a bit more in the event of a claim. You should also, where possible, take out cover for your car and home insurance with the one company to cash in on multi-policy discounts. Credit card Buy yourself some breathing room by switching your debt to a new credit card that offers 0% rate for the first six months. Use the six months to get ahead of hefty interest repayments and make a real dent in what you owe or, better still, pay it off. The trick here is not to rack up debt again once the honeymoon offer ends.

TECHNOLOGY: Twenty years ago, Australians didn't have bills for the internet, mobile phones and cable TV. New technologies have eaten into our wallets, but there is still plenty of room to save. Switch to a pre-paid deal for your mobile phone and limit data downloads.  Bundle your home phone and internet. Set up free voice-over technology, such as Skype, on your PC to talk to friends and family who are interstate or overseas. Can the cable. You can catch plenty of reruns of Friends on free TV.

FIND TIME: My final tip is to find time to follow through on some or all of the above suggestions. Time spent on getting your finances in order is as good as money in the bank.

source; Haven Newsletter,  Sept 11 - Blackfish