There is no fate that plans men’s lives. Whatever comes to us, good or bad, is usually the result of our own action or lack of action. – Herbert N. Casson
In just a few weeks, I will be embarking on a long awaited journey that will end in London! I am so freakin’ excited that it is finally happening. I’ve looked forward to and prepared for this trip for some time now and it feels surreal to see all the planning and preparation come together!
When we initially made this decision I had mixed emotions. Leaving behind everything and everyone I knew didn’t phase me. The thought of living in a new city excited me. Arriving with 12kgs on my back to start a new life seemed almost funny. But finding my feet in a new, and unknown, job market – now that really concerned me. I couldn’t, and still can’t, work out work out the highs and lows of my industry. I expected to be out of work for at least six months. So I decided my best course of action was to prepare myself for the worst. And so it began….save, save, save!
Saving was not a particularly easy exercise. It infiltrated my daily life, from grocery shopping to dining out to extracurricular activities. But having a purpose, a reason to be financially sensible, made things a lot easier.
So here’s what I did to get myself feeling comfortable about the move. So comfortable, in fact, that I resigned from work earlier than I needed to.
OPPORTUNITY COST. This has been my mantra and has worked really well with helping me visualise what I would be giving up should I choose to spend unnecessarily. Because at the end of the day life is all about choices.
Opportunity cost is a key concept in economics. The definition is ‘a benefit, profit, or value of something that must be given up to acquire or achieve something else’.
In reality, opportunity cost works something like this: I’m strolling through a department store when I spot a pair of jeans I really like. I know there’s a good chance they will end up at the back of my closet after a few wears. So to help me decide whether to make the purchase or not, I remind myself of what I have to give up for those pair of jeans? 5 days food and accommodation in Vietnam? Or a week’s worth of food in Thailand? Each time I made that comparison, I decided the trade-off was not really worth it.
So here are my tried and tested tips that I hope will help you achieve your dream.
The first step is working out your disposable income: Start with all incomings, then deduct all unavoidable expenses like rent, groceries, utilities, transport etc. Include a buffer in your budget as unexpected expenses can really throw you off-track! I have included an example below of how you can budget your expenses. Prepare something similar for each pay cycle (weekly, fortnightly or monthly). I’ve kept it simple in this demonstration so it may not reflect your personal circumstance.
Total Income 2,000
Insurance (all) 50
Going out 100
Total Expenses 1,400
Disposable Income (savings) 600
Transfer the entire disposable income into your savings account as soon as your income comes through. If you need to, open a separate account to manage your expenses if your payments are not due immediately. I found doing this prevented me from having easy access to funds that were allocated to other expenses. At the end of each month, any remaining funds I transferred into my savings account. This will start happening as you find other ways to spend less and save more.
MY TIPS TO HELP YOU SAVE
1. Cut Back on Unnecessary Shopping
Often, when I got bored, I headed into the shopping centre and returned with bags of things I didn’t need. If it’s the same with you, find other activities to keep yourself busy. Read a book, plan a trip even if its months away, read forums or blogs, go for a walk, volunteer. Plenty of free things to keep you busy.
2. Get friendly with Google
This applies to most unavoidable expenses. Gas, power, water, internet, grocery shopping, and even rent. The benefits of research are twofold: 1. It helps you find what you need at the cheapest price; and 2. It gives you a bit bargaining power when the time comes for a contract or lease renewal. Sometimes, companies will match the lowest price and give you a small discount on top of that. Winning! I’ll be doing the same when booking flights and accommodation for my upcoming holidays.
3. Getting money for free
All banks want your money, and they will pay you for keeping it with them. Once I decided to start saving, I found a bank that offered me a savings account that paid a high interest rate. You’ll be surprised by how quickly, and nicely, these interest payments add up over time. Just be careful you’re not being charged a fee for the account that is higher than the interest payments you receive. In fact, my account was not charged a fee at all!
4. Pack your lunch
I would normally spend at least $10 a day on buying lunch. That added up to nearly $3,000 a year. Looking back now, that figure seems ridiculous because I never bought anything that I could not have made myself at home. And I often didn’t go for the healthy option, either. So it was lose-lose. More recently, I began to pack my lunch to take to work – a sandwich, a salad or leftovers from dinner. Not only was it easy to do, it was also good for me. I usually find recipes online when I plan my meals. I found a site that I liked and stuck with it for a while. My favourite is the BBC Goodfood Guide website – it was simple dishes made using simple ingredients that didn’t cost much. Plus, it helped me improve my cooking skills.
5. Cut back on the treats
Coffee, chocolates, chips were all out the door. Of course, I indulged in them as a treat, just not as daily treats. A couple of coffees and a few treats will end up costing $10 a day, and that’s another $3,000 a year. So I cut back on coffee (limited to just one a day) and swapped my chocolates and chips for fresh fruit.
6. Cancel that gym membership
This was another trap that I fell into for many years. Hundreds of dollars spent each year to maintain a gym membership that I used only a handful of times. I could have flushed that money down the toilet and it would have been no different. This is not to say that I didn’t look after myself. Instead of the gym, I went for walks and hikes near where I live. Yoga, cross fit and swimming were other great alternatives for keeping fit. However, most of these classes were paid for using coupons and vouchers bought online for less than half price. Studios and gyms also offer trial periods at incredibly low cost which I made use of. Just keep your eyes and ears open for deals that you can use.
7. Getting smart with grocery shopping
While this has been my biggest challenge, I learned that I can reduce my grocery bills by being smart. Buying in bulk is usually a good start. I often found large supermarkets can be more expensive for certain items compared to the small store next door, so a quick comparison always helped. Buying standard items when they go on sale was another great way to cut costs. I just had to remember not to get too carried away and stock up more than I would use. I also found incorporating vegetarian dinners into my weekly meal plan also helped with lowering costs.
8. Halving the rent
For me, living in a share house was a great way to accelerate my savings. Sharing rent, bills and costs of household items is a sure fire way to cut costs. There are other advantages as well, such as sharing food or car pooling.
9. Dining out for less
Since I chose not to live like a recluse, catching up with friends over dinner was unavoidable. Even here, I found I could make smart choices. Skipping the entree (starter) and just ordering the main was a bit of a no brainer. I also tried not to go for the most expensive item on the menu and opted for something in-between. With the BF, we would go out for breakfast instead of dinner which always costed less. We’d also go out mid-week when there were specials on, or get take-away instead of dining in.
10. Zero out the credit card
One of the very first things I did was to pay off my credit card. Admittedly, the balance wasn’t large but I was still paying interest at the end of each month. I figured there was no point in earning 3% interest on my savings while at the same time paying 10% interest on my credit card. Since then, I’ve only used the card for emergencies and have a zero balance at the end of each billing cycle to avoid any interest charges.
And finally, I remembered not to be too hard on myself if I stumbled along the way. I even treated myself occasionally. It was always a work in progress and I kept improving as I found new ways to squirrel away more. The best incentive was seeing my hard work paying off.
So if I can do it, you can to. It just takes a bit of effort and determination to finally get to your goal.