One of my goals for this year is to finish with as much wealth in cash and investments as I began. This might sound simple, but I am not currently working in regular employment and I do not want to go back to my previous career in administration. To complicate things further, I am enrolled in full time study, which is expensive. This means that I need to get creative.
I began this process by counting every cent that I have. I wrote an Excel spreadsheet listing each of my accounts and the total amounts in them. I counted the money in my purse and added it in. Even cheques that I hadn’t banked at that point were included. My first step is total honesty with myself, because without knowing exactly where I am starting I will have no idea where I need to end up.
There are two ways to improve cash flow: increase income and reduce expenses. Both of these categories can be divided into fixed and irregular. The fixed expenses in my life are the first things I am going to target. These are the expenses that come from contracts and are generally set up as direct debits. I rarely think about them, so I want to target them while I remember them. Here is the list of my fixed expenses:
- Rent*: $360 per week or $18,720 per year
- Gym: $120 per fortnight or $3,120 per year
- Health insurance: $112.71 or $1,352.52 per year
- Internet*: $69.95 per month or $839.40 per year
- Mobile phone: $62 per month or $744 per year
- Websites: $120 per year (but I’m not even sure on this one!)
- Credit card: $35 per year
The starred items are shared expenses, so I only pay half. This means my fixed expenses for the year are $15,031.22, and that is without food, electricity, clothing, going out, and all the other parts that form a normal life. It is far too high, so I have reconsidered how much I am prepared to spend on each of these items. Here is that list again:
- Rent: We were careful on this one when we moved in, and most people can’t believe how little we are paying for our place. Rental prices in Canberra are high, and we probably should be paying about $400 per week for our little house. The only way we could bring the per person price down would be to start sharing, and after our last house neither of us want to repeat that experience. This expense can’t be improved at this time.
- Gym: When I first signed up, I was somehow convinced that I also needed to sign up for personal training on top of my membership. I am going to cut the personal training as soon as the contract ends and go to the classes included with the base membership instead. This will reduce my costs from $120 to $44 per fortnight, saving me $1,976 per year.
- Health insurance: I reviewed this one a few years ago, and preliminary research suggests that I am still getting a good price. However, I am paying for hospital and extras cover when I probably only need hospital. Rules about health insurance are complicated in Australia, so I need to get some advice before I make a decision here, but if I drop the extras cover I might save $360 per year. If I switch to an annual policy, I should be able to save even more.
- Internet: What we pay is definitely too high for what we get. Most companies require a 2 year contract if we are going to get a better rate, and we probably won’t be living here that long. This one requires a lot more research.
- Mobile phone: I found a small company, Vaya, that is a reseller for Optus, which is the company I have been using. Vaya charge $11 for a service similar to what Optus was charging me $59 for. They also have an easy direct debit system, so there will never be another $15 late fee, and they don’t charge me to receive my bill. Annual saving: $612.
- Websites: I have had so many problems with website hosting this year. If we are able to find a better ISP, and they provide free website hosting, I could roll this into our internet bill. Penmonkey will still cost me if I continue to pay for the domain name, but my main website will not. I am considering merging the two sites if I can figure out how.
- Credit card: I keep this one out of habit, but I really don’t need it. The plan is to move all my direct debits from this card to my transaction account before I hit the annual fee in April.
The changes that I can make here are simple, little things, that will stretch far into the future. I could probably get the research done in a single day, and most of them should just require filling out a form to achieve. Total expected savings: $3,043.
Expected change to my quality of life? Minimal, but, well … how would you feel if someone handed you three thousand dollars for a single day of work? Add in the tax I don’t have to pay because I am saving money, and it is even more valuable. At my last job, it would have taken four weeks to clear that much money.
Which fixed expenses do you have that could be reduced or eliminated? What would you need to change to get a better arrangement for yourself?