As a financial wellbeing expert, I encourage people to strive for financial confidence without extreme frugality. Here are some of my top tips to take control of your finances without having to activate hyper frugality mode.
Facing your finances
Such a rapid rise in the cost of living can leave us feeling helpless, and pressure to cut back in every area can take a serious toll on our overall well being. This can then create a sense of financial overwhelm that holds us back from taking any action at all. Avoidance then leaves us financially compromised, and the stress cycle begins again.
In order to establish some semblance of financial confidence during a cost of living crisis, we first need to face our own unique financial reality. Trying to navigate higher prices with the same approach as pre-crisis is setting yourself up for failure. Sit down and get the lay of the land. How much have your costs increased? What are your regular expenses now, and how does this compare to your income? Getting clear on what’s going on is the first step towards financial confidence.
Big impact, low sacrifice changes
The first place to start when looking for ways to save money is on big impact, low sacrifice changes. These are changes that free up money without compromising much of your lifestyle or routine.
Start with the big hitters.
- If you have a home loan, speak to a broker about whether you can get a better rate. Shaving 1% off your interest repayments can have a huge impact on your finances, with almost no disruption to your lifestyle.
- Compare energy prices and look for cheaper rates or switching bonuses. Plus, check your state or territory government for incentives or rebates on your power bills.
- Check in with your phone bill – particularly if you’re on a month-to-month plan. Call or live chat your provider and ask if there are any deals available – often you can be switched to a cheaper plan instantly, saving you money every single month.
- If you pay a credit card annual fee, speak to your provider about a fee waiver or discount. You never know unless you ask.
Then, on a more micro level, look at ways to skim a small amount off of several areas rather than huge savings in one place. It can feel deflating to only establish a saving of $10, but do that on five things and the savings soon add up.
- Can you car pool with a coworker to slash your petrol spend?
- Organise a potluck dinner with friends to spread the cost of groceries?
- Order a fixed price mixed veggie box to cut back on pricey produce at the supermarket?
- Or even get creative with sharing. Set up a streaming share pool with friends or family – one pay Netflix, another pay Disney+, one pay Stan, and all share the logins.
Establish your financial values
It’s important to maintain your overall sense of wellbeing while cutting costs. This can start with establishing your financial values, and honouring them in your financial behaviours. Financial values are all about how you use your financial resources to support and enhance your life. We all have different beliefs and priorities, and therefore different values around money. By establishing what matters most to you, you can allocate more money to honouring those things, and cut back on other areas.
To establish your financial values, think about some of the best things you’ve ever bought or spent money on. What words do you associate with those things? It might be family, convenience, freedom, comfort, health – look for commonalities in the words that are coming up. From here you can start to establish the areas that bring you the most value.
Focus on financial prioritisation
Once you have an idea of your financial values, you can work on managing your money in a way that honours them. Think of your spending like a pyramid. At the bottom you’re covering your basic needs like housing and essential food – which you’ve already scanned for big impact low sacrifice changes. Then, if you have got any money leftover for discretionary spending, you can add layers based on your financial values.
This allows us to make financial changes that are unique to us as individuals. To one person, cancelling a gym membership might be the most obvious way to cut back on outgoings, but if fitness and health is a huge financial value for you, your lifestyle will benefit from cutting back on something you value less.
Get clear on what's going where
When you know your priorities, you can easily cut back on the things that matter less to you, in order to save money in a way that sacrifices the least lifestyle value. (I’m obviously going to recommend MoneyHub by H&R Block, but finding the one that works for you is key!)
Track your spending for a few weeks and categorise your transactions. This gives you a clear view of where your money is going. It can sound laborious, but tracking helps identify areas where money could be leaking out of your lifestyle.
Something people often uncover is that they're popping to the grocery store for what they call a 'top up shop', and spending more than they realised on their basic needs. Shopping smarter and planning out the full week in one shop can drastically reduce your overall grocery spend.
Emma Edwards founded The Broke Generation in 2018 as a financial media destination designed to make money interesting and engaging for young women. A former self-confessed 'hot money mess', Emma turned years of financial chaos around, by teaching herself how to save, invest and most importantly, she says, build a positive relationship with money. She's also H&R Block’s Small Business ambassador.
