Puzzle Finance Blog


Shifts in the balance


It's time to prepare a budget, but what should the numbers be? How much do other people spend and on what?

''My fiance and I are both 23 and purchased our first house in August,'' Adams says. ''We've since had a massive rethink about our expenses.''

It's a budgeting exercise many of us will be - or should be - going through at the start of the year.

''We [no longer] have a home phone line and only use our mobile phones, which eliminates about $40 a month for us,'' Adams says. ''Until recently, we frequented local restaurants for dinner every week, but now we make all meals at home. That's saved us nearly $100 a week, which adds up quite quickly.

''I've been able to scale back considerably by ceasing magazine subscriptions … and by shopping on eBay for basic wardrobe items.''

Despite the temptation to make their new home picture-perfect - ''we wanted everything and wanted it all to be brand new'' - the couple resisted and furnished it mostly with furniture bequeathed by or borrowed from family and friends.

These savings and the recent drop in interest rates mean they have been able to increase their mortgage repayments, meaning they should own their home sooner.

Adams and her partner are part of a wider trend of scaling back by consumers, says social researcher and the managing director of Quantum Market Research, Imogen Randell.

Quantum's annual AustraliaSCAN survey shows that the caution that emerged at the height of the global financial crisis is still evident, partly because of continuing concern about financial security but also because of a general yearning for simpler times.

''Our lives are becoming increasingly complex,'' Randell says. ''All sorts of everyday decisions we have to make are becoming much more demanding of us.''

Which mobile phone plan should you be on? Which energy company will mean the lowest bills? ''Everything is hard, it's more complicated and we have to pay more attention to it, yet we don't have any more hours in the day,'' Randell says.

''It's little wonder people are reluctant to change super funds. It requires so much time and effort to engage … and we don't have time to sit down and work it out.''

A generation ago, when household technology amounted to one television and a phone, making savings was as simple as turning the lights off when you left a room. ''Now there's a TV in most rooms, everyone has a laptop, there are two fridges, not one … we have so much more stuff,'' Randell says.

''Increasingly, we are time-pressured, we are feeling out of control, we are 'over' choices - we are choice fatigued. So there's definitely a nostalgia for simpler days.''

The clock will never be wound back entirely, she says, ''but we're far more cautious, far more deliberate in how we spend our money''.

That's the big picture, but how do people allocate their spending?

One place to look is in the basket of goods and services used to calculate the consumer price index (CPI). The accompanying table shows the items the Australian Bureau of Statistics considers the average weekly spending for households in metropolitan Australia.

The dollar figures will give you an idea of where you sit compared with the average, but your personal circumstances - your income, the size of your mortgage - might mean you can afford to spend more or less.

Another benchmark is the percentage of income other Australians direct to different types of spending, independent of the actual dollar figure.

The percentage breakdown in the table, also based on the CPI basket, shows that for the average city dweller, the biggest expense is housing (rent or mortgage), which accounts for 19 per cent of their spending.

Groceries and owning and maintaining a car each take up 11 per cent. Dining out and takeaways account for about 5 per cent of spending on average, and power bills and clothing each 4 per cent.

Looking at the table, it's easy to see where you could make cuts. If you smoke, you could save nearly $1700 a year by giving up; halve your alcohol intake and there's another $1700 in your pocket. Eat out once a month instead of once a week and you'll bank $3000. Do you spend more than the average on holidays?

Looking back through the ABS's historical data, it becomes apparent that an increasing proportion of our spending - as a percentage, not just in dollar terms - is going to recreation (where audiovisual and computing equipment and services now take up a big chunk) and telecommunications.

Recreation has gone from 9 per cent of our spending two decades ago to nearly 13 per cent, while communication has gone from 1.7 per cent to 3.1 per cent.

So if you want to ''spend like it's 1993'', you could try to reduce your internet and mobile phone usage, or find a plan that gives you the same calls and data but for a cheaper price.

The Australian Mobile Telecommunications Association (AMTA) has tips on managing your spending at www.amta.org.au/pages/consumer.tips. Going for a plan with the lowest call costs might not necessarily be the best or cheapest option, it says; that depends on how much you use other services such as text messaging and voicemail. Check your usage regularly via the monitoring tools most telcos now provide, and set up spending ''alerts''.

It's also worth considering whether you can benefit from plans that allow you free or cheaper calls at certain times of day or to certain people, the AMTA says.

Not surprisingly, housing is also taking up more of our spending these days, rising from 16 per cent to 19 per cent.

The chief executive of Teachers Mutual Bank, Steve James, says the recent rate cuts have helped ease the burden, but borrowers should shop around to see if they can refinance on a lower rate elsewhere (but check your loan-exit costs first).

Alternatively, it might pay to switch from a fixed- to a variable-rate loan (or vice versa, depending on your present terms). Do the maths to see whether you would be better off. Again, factor in any costs for breaking your loan contract.

Power bills have risen from 2.3 per cent to 3.6 per cent of spending during the past two decades. Comparison service Make It Cheaper reckons it's possible to shave about $300 off your bill by shopping around (if you're not locked into a contract).

If you can't find a cheaper supplier, it suggests getting into good habits such as switching lights off when they're not needed, using ceiling fans instead of airconditioning - or at least setting the aircon at 21-23 degrees rather than at ''Arctic'' - and using power-saving lamps.

Rising costs for education and health care mean they are also up, proportionately, but there might be less room for movement in your budget there.

The good news is that spending on alcohol and tobacco, groceries, clothing and household equipment has fallen proportionately, the latter probably because of cheaper imports.

Posted by Lesley Parker - The Age on 20th February, 2013 | Comments | Trackbacks
Tags:

Bookmark and Share

The trackback URL for this page is http://www.puzzlefinance.com.au/trackback?post=26687723


Trackbacks

There are no trackbacks for this post


Comments

There are no comments for this post


Post a Comment

HTML is not allowed in comments, http://... will be automatically linked.


Name (required):


Email Address (not displayed):


Comment (required):


To help prevent spam, please enter the word aced here:

Puzzle Finance Blog

About Puzzle Finance


Archives

September 2017
August 2017
July 2017
June 2017
May 2017
March 2017
February 2017
January 2017
December 2016
November 2016
October 2016
July 2016
June 2016
May 2016
April 2016
March 2016
February 2016
January 2016
December 2015
November 2015
October 2015
September 2015
August 2015
July 2015
June 2015
May 2015
April 2015
March 2015
February 2015
January 2015
December 2014
November 2014
October 2014
September 2014
August 2014
July 2014
June 2014
May 2014
April 2014
March 2014
February 2014
January 2014
December 2013
November 2013
October 2013
September 2013
August 2013
July 2013
June 2013
May 2013
April 2013
March 2013
February 2013
January 2013
December 2012
November 2012
October 2012
September 2012
August 2012
July 2012
June 2012
May 2012
April 2012
March 2012
February 2012
January 2012
December 2011
November 2011
October 2011
September 2011
August 2011
July 2011
June 2011
May 2011
April 2011
March 2011
February 2011
January 2011
December 2010
November 2010
October 2010
September 2010

Tags

Purchase or Rent (1)
The Age (1)