Are you breaking the budget regularly? We know we are supposed to spend less money than we earn, but that isn’t always easy in practice. Below, we outline the bad spending habits that could be leading to your budget blow-outs so you can address them and get your finances back on track.
1. Credit cards
The top three causes of bankruptcy in Australia are unemployment, divorce and excessive use of credit cards. With ready access to credit cards it is way too easy for people to live beyond their means. If you are not paying the balance off your credit card at the end of every month you need to change your habits. The first thing to do in this situation is to stop putting ordinary living expenses on your credit card. If you have only budgeted for a certain amount of groceries per week, take only that amount of cash to the shops and leave the card at home. This is a great way to force yourself to stick to your budget.
2. Paying easy-to-avoid fees
There can be few worse habits than literally paying for nothing. If your bank charges for using another bank’s ATM, either withdraw money at your own bank’s ATM or change to a bank that doesn’t charge those fees for their cards. Alternatively, you can make cash withdrawals when you are doing your supermarket shopping. If you are at a shop or supermarket that places a surcharge on credit card transactions, try to pay cash or eftpos your transactions at these stores instead.
3. Drinking bottled water
Staying hydrated is super important, but choosing bottled water over tap water may be costing you a lot more than you think. If you buy bottled water regularly it can easily cost you up to $1000 per year. Switching to tap water can make a huge difference, and if you refrigerate the bottle overnight, you won’t be able to taste the difference.
4. Using incandescent light bulbs
They might seem cheaper at the time of purchase, but buying the cheapest light bulbs at the supermarket is costing you money on your power bills and over the life of the bulbs. LED light bulbs last for up to 20 years and consume considerably less power. If you are still looking purely at the price in the supermarket and picking the cheapest option, you are simply wasting good money.
5. Buying extended warranties
If you are buying an expensive item the salesperson will almost always try and sell you an extended warranty. This may seem like a smart idea, but it is often a waste of money. If an item is going to fail it will usually happen within the first 12 months (when you will be covered by the regular warranty), or after the period of the extended warranty. If your item fails after the initial warranty period you may still be covered by the Australian consumer law if the purchase did not conform to expectations.
6. Late fees
Many of your utilities will offer a discount for paying on time, but if you are missing the deadline regularly, you are pouring money down the drain. If you are regularly forgetting to pay your bills on time, it could be worthwhile setting up a direct debit arrangement to make sure that you are not paying late fees or missing discounts.
7. Buying brand-name products
Sometimes there is a difference in quality between a brand name product and its generic equivalent, but a lot of the time you are just paying more for a fancy box, or plastic wrapping. Often the products are made in the same factory. For any item that you use you should at least try the generic equivalent before opting for the brand name equivalent. If you can tell the difference, and you think it is worth paying for, continue, but otherwise make the switch. Most supermarkets these days offer a premium generic brand that is still considerably cheaper than most of the brand name products on the shelves.
Your chances of winning Tattslotto are so small that they are almost exactly the same as not buying a ticket. If you are gambling you should consider it as an entertainment expense for budgeting purposes and that means you need to compare it to other entertainment expenses. If you still find gambling provides you with more entertainment value than seeing a movie, a live performance or going out to dinner with family and friends, you may want to keep it in the budget. If gambling is a problem for you, you can find gambling assistance services in your state or territory here.
9. Spontaneous spending decisions
Sales people are very good at their job. If you see something and buy it immediately are doing yourself a disservice. Force yourself to think about every large spending decision that you make. Always walk out of the store before purchasing and do some quick research, to make sure that the price is as attractive as it sounds. More often than not, that sale price won’t end up being quite as good a deal as you think it is.
10. Paying for unused services
Beware buying 12-month memberships, especially if you are the type of person who will try something and then quickly move onto the next thing. Gym memberships are perhaps the most common way people fall into the trap of paying for unused services. People join with the best of intentions and then things get hard and they start attending less and less frequently. If possible you should pay as you go, or start by paying monthly membership fees. Review your bank statements and see what memberships or fees you are not using (these may also include regular app services for your smartphone) and cancel them to start saving money.
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