What are you personal expenses? Do you spend more than your income?

My wife and I tracked our spend for 1 month. I'm a saver and she is a spender which makes it quite a difficult task because she likely left a few things out

What we did find crazy though was our coffee spend! We were averaging about 3 take away coffees between us a day ($12). So that was $84 a week or over $4000 a year on coffee!
We purchsed a coffee machine and I cut back a bit so have probably saved a couple of thousand on that (still enjoy a good barista made coffee on the weekends and when I know I have a long work day ahead).

 

Well, you certainly do need an overhaul. There are a lot of things that I find excessive, but let's start with the food.

You are a family of 4, and you spend $350pw on groceries, and another $60 on lunches plus there's more unaccounted spending that you think could also be food! Wow! I can't comprehend this! So...you shop at Aldi for basics & Coles. I would give Costco a big miss for starters. Yes, there are some things that are very cheap, but is it a false economy? I found going to Costco that I bought 'stuff' just because it was at Costco, so it had to be cheap, right? But when I sat down & did the numbers, we were actually spending more. You need to be careful there.

It may help to work out the weeks menus, in advance and buy what you need for this, and only this. Buy fruit & veg in season. Cut down, or remove the pre packaged drinks. Water is much better for you & the family than soft drink, and it's free out of the tap. The soft drinks can be reserved for special occasions only.

Take leftovers to work for lunch. Leave your credit card at home when you go to work and take cash. Work out how much you need per week for your petrol/train or whatever mode of transport you use, and allocate yourself a small amount of discretionary spend during the week. Take ONLY that amount of cash with you. Once it's gone, it's gone! If you can physically see it, you are likely to be aware of it and will be forced to make better choices.

To be honest, I hate Credit/Debit cards. It is so easy to spend $5 here, $10 there, another $20 somewhere else. All these small expenses add up, but because you are doing all the spending electronically, you loose touch and spend, spend, spend. I take an amount of cash out each week and pay for everything with it, like in the ' old days ' and rarely use the credit card. It is reserved for larger spends, like car repairs & so on.

Kids parties @ $600 EACH! And one of them is still in pre-school? Kids are great! Especially when they are young. They don't care what you spend on a party, all they care about is how much fun they have, and if their friends are there.

I'm guessing that you take them to venues for a party, or you get a heap of stuff delivered to your place for the day. It is really easy to get caught up & want to give your kids the best time ever, but stop & think for a bit. Very young children are happy to have a party at home. They don't need jumping castles or pony rides or anything like that. Just heaps of food. Fairy bread is cheap & easy & kids love it. Play old fashioned games like pin the tail & musical chairs etc & let them have fun the old fashioned way. You can have a Pirate Party or a Barbie Party or Super Hero's etc to spice it up. As they get older you need to get more creative, but a disco party with a few fun lights (from Ebay & Cheap) can work wonders too.

If they want to go to an expensive venue, work out the cost you are happy with, then set a limit on the number of friends they can invite. Give them the choice. Party at home & invite 35 or party at XXX and invite 15.

To put this into perspective, some people's income is only $44k.

 

Saving 2500 a week only exspense is mortage and bills at 400 a week. Food and accomodation is provided through work doing fifo.

 

Depends on what you buy and why you buy it I guess

I monitor this forthnightly (per salary cycle to make sure all transfer happen). If I see overspend, I start monitoring it weekly - easy as most of my transactions are on card nowadays. I have credit card as well, paid in full by the end of the month and if my everyday account don't have enough money to pay it, then there's a spending problem.

 

Man, I have to say this is an awesome topic.

Great discussion and great courage by @qonyx_sydney putting it all out there for input.

Nice to see!

 

Thanks for the advise and its good that i finally woke up to the fact that i need an overhaul. I guess i was under the illusion that because we weren't eating at fancy restaurants and driving brand new foreign exotic cars - (compared to some work colleagues) that we were living well below our means however it is now clear that unrestrained shopping at costco/aldi/bigw/kmart can hurt you almost as much financially

Unfortunately i got caught a little in the status trap, and thought that because of my high income i wouldn't have to monitor what i thought to be 'budget' expenses - as long as they were at the costco/aldi/bigw/kmart

The good news is that we don't have any real unnecessary financial commitments (credit card debt, leased cars, foxtel, etc)

This means that almost everything is discretionary and it should be easier to carve back spending. Going forward i'm going to download my transactions weekly to monitor and control spending. Rather than go cold-turkey, i'll aim to reduce spend initially on the highly discretionary expenses like food, entertainment and other cash.

I have heard of people using accountants to help with this? Do you think that this could be value add or have i already done most of the heavy lifting?

 

Yup thats the plan. I just got pre-approval today from ANZ for another $465k, so here comes another IP. Better to be spend here as these are definitely worth the pain

Now i just got to find one!

 

No, I don't think you need an accountant. You've identified that there's a problem, that's the first step. Now start to take a good critical look at it & you should be able to form a budget and work it out yourself. Getting your accountant involved will only add more expenses.

 

"Insanity is doing the same thing over and over again and expecting a different outcome" - A Einstein

It was definitely uncomfortable putting it out there, but when i went through our expenses i was really shocked to see the breakdown. Imagine if i realized this in say 20years time, when i was 60 and realized i had next to nothing and would live a very poor quality of life as a result through retirement.

The sad thing is that the large majority of the population also have no idea how to manage their financials and if asked wouldn't be able to tell you the breakdown of their spend. They get caught up in the rat-race and before they know it their life is over and have nothing to show for it.

 

I just did the last 3 weeks now and whilst it takes some time to do, i think the benefit is definitely worth it. Ongoing i will be doing this weekly until our spend is under better control

 

Did you both end up aligning to the same goal and synch with your strategy on this. I'm interested in the approach that you took to make sure you were both committed to the journey.

 

They should buy an IP and talk to a mortgage broker . Was given a comprehensive list of income x expenditure to fill and I have several oops moment

Controlling spending doesn't mean eating bread and baked beans. It's a matter of what you can trade off.

I spent $4 a day for coffee and many lunch out (aka. $10 on work day). Try to give up coffee (and safe $1500 a year) and can't do it. So I give up buying lunch, it's so much easier than letting my coffee go (buy lunch out = less coffee money )

 

Last financial year I spent about 40k. This is off a net income of roughly 100k. This means almost 60% of my income was saved. I have read extensively on how savings rate have such a dramatic effect on wealth accumulation, but the clincher for me of keeping a 50% plus savings rate is that it means for every year worked, if you maintain the same spending you've got another year off. That makes a lot of sense for me.