I was wandering around my favorite website, which led me to a few really interesting places. Lovely Margaret at Money and Financial Tranquility provoked “what are you going to do with your tax return?”, and got me thinking about not just the fact that my tax return is overdue for last year (oops), but that there must be ways I can reduce my spending further.
And so I got to thinking – it must be time for me to make a list of some financial mini-goals. Here are a few of my personal goals that you may find useful:
1. Make a list of all income and expenses – I’ve used Microsoft Excel to list out everything I have to pay out on a fortnightly, monthly, bi-monthly, quarterly and annual basis. Then I determined how much income I had to pay all these expenses. That’s when I realized the two don’t add up! What did I learn from this exercise? You can’t fix your debt problems unless you have visibility of them.
What did I find?
Gas and electricity are draining $2400+ each year. Pay TV is $700. All my insurance policies (I know I need them, but they’re a burden I can surely pay less for?)… nearly $3000. Ouch. Mortgage is unimaginably high – I won’t shock you with that one. I’m still in shock myself. If I can find cheaper deals for these things, I can potentially save many hundreds of dollars every month.
2. Change Life Insurance policy to the bare minimum to keep it, and not lose the $5000 I’ve put into it already, then put the remainder that I would have spent on life insurance into my Superannuation. That way, I get to enjoy it in my retirement, yet the kids will still be looked after when I die.
3. Ring up the Electricity and Gas comparison companies and get quotes from them for cheaper gas and electricity. There is always a better deal to be had and these comparison companies broker great deals so it’s in their interests to help you.
4. Connect the set top box and surrender the subscription to pay tv. There’s never anything on anyway, and there are dozens of free-to-air channels on digital TV here in Australia.
5. Organise the paperwork for one or more zero percent or low interest balance-transfer credit card and get out of the 21.49% card/s that I currently have. Seriously, why continue paying massive interest for a single day longer. Snap to it – this one is a massive money saving tip.
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6. Ring up the Insurance comparison companies and get quotes for new health, car, house and contents insurance. I know I can find a better deal. Again, these companies make money for each customer they sign up for a new policy – they are desperate to save you money, because it makes them money.
7. How could I forget the banks? They also have comparison companies who’ll help you find a better home loan product! If like me you’re paying off more than one mortgage, you could be saving thousands of dollars with a different bank. The changeover costs are not high, and as long as your savings in the first year pay those costs, in the long run you’ll be so much better off. Over the course of a $300,000.00 25-year principal-and-interest mortgage with an interest rate of 7.49%, you’ll pay $364,000 in interest alone. Change that mortgage to 6.49% and the savings are remarkable! $306,000 interest is paid out over the 25 years with this new loan, a saving of $58,000.00! But it gets better – I’ve found rates as low as 4.51% (comparison rate). Compare this to the 7.49% I’m currently paying and that’s a real shock! I think I’ve just found a saving of $165,000.00 for each of my mortgages!
Having saved so much with changing my utility, insurance, credit card and mortgage accounts, I will now have more cash available.
8. Now that the cards are all on zero percent balance-transfer accounts, it’s time to plan to pay off the credit cards as fast as possible, and before the interest-free period expires. I’ll re-jig my expenses list that I created at point 1, so that I understand how much closer all the savings have gotten me to being able to afford my life. I won’t worry yet about plowing all my extra cash into the mortgage, that can happen after the toxic debt of credit cards is destroyed. I’ll start with the card with the smallest balance and get it paid off asap. Then move on to the larger cards, cutting each card up as I eliminate its balance.
9. While we’re on the subject of credit cards – here’s a tip I accidentally taught myself. It wasn’t something I read somewhere or heard on TV, in fact, I don’t recall ever hearing this tip. In one of my periods of living beyond my means, I received replacement cards. They came with a nice little sticker on them saying that the card won’t work till I ring to activate it. Perfect deterrent. And so I never rang. I kept the card on my desk and never activated it or signed it. I just kept paying it off and surviving on the other credit cards. Until the next card arrived, and I did the same. One by one, I forced myself to stop using my cards. So my advice to you is … don’t ‘activate’ a replacement card when the banks send you one. Don’t even open the envelope with the PIN number in it. And leave the card in a safe place. Never take it with you. Just avoid using your credit card at all, ever!
10. Fast forward a few months… Alright, all the credit cards are paid off, cut up and I’m now living off my income and not paying the banks a fortune! Time to build up a buffer of savings. I’ve got a high interest online savings account. Time to start a regular bank transfer. These are easy to set up and once they are set and forgotten, you quickly start to build up funds. This account will need to have at least three months worth of salary in it. Just in case I get hit by a bus, there will be money there to pay the bills and mortgage.
11. I don’t have an 11. See I titled this post “10 Ways to Dig Yourself Out of Debt”. If I were to do an 11, it would be about frugally living!
Check out the masses of ideas for frugal living at Living on a Dime!
I hope you’ve found some ideas above, and hope that this post has spurred you into action to get yourself in better financial position. Have you got any suggestions for more ways to save money? Please leave a comment in the box below and share your ideas with me and my readers. Here’s to digging yourself out of “deep in debt”.
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