Researchers claim children cost as much as a new BMW. Find out how to reduce the price tag to a more realistic small Toyota … without impairing your lifestyle.
Living Better Than Ever in an Age of Less, says money does not equal financial freedom. Part of accomplishing financial freedom is what I call the new frugality, he explains. This is not about deprivation. It is about choice.
His way is to keep track of every dollar you earn, plug the hidden leaks (such as credit card interest), spend less money on food, measure success in terms of happiness and see how much money you can save while boosting your quality of life. Of course, sometimes life does get in the way and loans are needed. However, if you do them in the right way and know you are able to repay your Bridging Loans, for example, this won’t have a major impact on your new spending style.
By completing an activity in a slightly different way, you can actually cut out a whole lot of hidden costs! This can mean: Shopping for groceries online ( meaning you will save on fuel and impulse purchases), cheap-night DVD rental (save on fuel, baby sitter, movie tickets, popcorn), home-cooking (save the price of the meal today, the bigger size dress tomorrow and the heart operation in the future).
Beware of bargains
Price and quality often go hand in hand. Buying a $2 umbrella that breaks on day two is false economy. So is buying something you do not need just because it is cheap.
If the sale is out of your way, calculate the cost of transport. Also, a 10% sale sounds good, but not if you are borrowing money at 15% to pay for it.
Buying in bulk only works if you use in bulk. Do not buy a 5kg bag of salt just because it works out cheaper per teaspoon. Do not buy a half a lamb if you have to run a second freezer to store it. Also, once you have your bulk bargain, do not be tempted to use more of it than usual.
It is always worth wiping out money-drains like:
- interest on debt
- traffic fines
- soft drinks
- bank fees (shop around for an account that suits your needs)
- excessive luxuries, whatever that means in your household.
Cutting some costs can lead to bigger expenses: think engine oil and what would happen if you skimped on it.
Buy milk not Coca Cola, even if milk is more expensive. Supplement your beans-on-toast dinners with vegetables in season (carrots and pumpkins in winter, tomatoes and asparagus in summer) to make them more healthy.
Develop a re-use culture: pre-loved toys, hand-me down clothes, toy library, garage sales, local library. Think what else you can reuse: envelopes, tea bags, wrapping paper, regift unwanted presents. Make your own: baby toys from boxes, sponges and wooden spoons; jams from second-grade fruit; pasta, soup, gravy, muffins, homemade pizza.
Do not cut:
- car and house maintenance
- swimming lessons
Many companies have special offers to attract new customers, but do not forget that a disconnection fee usually applies when you switch suppliers. Remember to add that to your calculations and make sure that the special price you are getting is guaranteed for at least a year. Plus, shop around for the best deal on landline rental combined with broadband and mobile phone packages. There is a lot of competition out there now with new companies such as 2 Degrees offering some great deals.
Special needs families
Work and Income can help with: disability allowances and insurance, travel costs, special equipment and diet. Accordingly, you might also want to take a look at this useful resource that answers common questions such as ‘how to get disability insurance?‘ and much more.
Single parent families
Many single parents assume they have to return to work, but before you do, consider the cost of childcare, transport, work clothes and tax.
Single fluctuating income
For a family on a single fluctuating income (e.g. freelance artists, contractors) who are eligible for Working for Families (family tax credit), it might be better to sign up for a lump sum payment. The downside is you only get it once a year, but it is better than having to pay them back, if you have received too much, when they assess your income at the end of the financial year.
Studying means single income but no free time. Consider time-efficient ways to boost your income: babysitting, lodgers, full boarders (serve what the family eats), nightshift customer support.
The last word
Says a mum who turned down a full-time TV contract: Being a stay-at-home parent is the most rewarding, yet the most challenging, job. Sometimes you feel guilty you are not earning. Some days feel like Groundhog Day. But celebrate the small things and live in the moment.
Top tips from parents
- Listen to all the advice, but only take what works for you. A budget meal wastes money if nobody eats it.
- Skip your weekly shopping once in a while and use what is in the pantry.
- Put $5 a week into a Christmas Club (The Warehouse, Mad Butcher, supermarkets, etc).
- Sophie Grey (destitute gourmet) has great meal ideas.
- Barter: e.g. a weekend away for some babysitting; a decorated birthday cake for a hand-made dollhouse.
- If you need a financial manager, shop around. Some will charge a lot for off-the-rack advice that is not streamlined to your needs.
- Do not say you cannot afford something, say you are choosing to spend money elsewhere.
- Value money, do not worship it.
BNZ has a Get Money Wise online and print brochure full of investment tips and financial goal setting. They also advise to think carefully before agreeing to be a guarantor for a loan as you will have to pay back the loan if they do not keep up the payments.
ASB recommends reducing your debt before you open a savings account, advising that the cost is much greater than the benefit of the investment returns, especially after tax. Plus take a long-term view of your finances. KiwiSaver has great incentives to save/invest for a long-term goal.
National Bank advises that if you have loans from many sources you could be paying more interest and admin fees than you need to. Consolidate your debt into one loan with a set interest rate and due date. Shop around for a loan that will not penalise you for paying off the debt faster.
To help you stick to the budget, have separate bank account suffixes for your expenses: one for automatic payments, one for fixed expenses (WOFs, haircuts, car registration), one for food and petrol. Your bank will advise you how to structure the accounts to avoid paying banking fees.
By Yvonne Eve Walus