For past generations, outsourcing often meant slinging a couple of bucks to a local teenager for a few hours of babysitting. These days, outsourcing is big business in an industry worth $510 billion annually. The swing to do-it-for-me (DIFM) rather than do-it-yourself, may have fuelled the rise of household names like Uber, Wotif and Deliveroo, but it’s also leaving us out of pocket.
Research by the Ruthven Institute estimates Australians spend $510 billion annually on outsourcing. That works out to $52,900 per household, or about $1,020 each week on tasks we used to do ourselves.
But it’s worth a closer look at what’s involved. With average weekly household income in Australia sitting at $2,349, it’s clear not all of us can afford to throw $1,020 each week at outsourcing. We checked out the numbers and found the picture isn’t quite as grim as it first appears.
Top 5 outsourced tasks
Despite that jaw-dropping figure of $52,900 spent on outsourcing, only a small proportion goes towards everyday tasks. The Ruthven Institute report took a fairly broad view of ‘outsourcing’ and the top five areas of spending highlight this, though there are still plenty of opportunities to save.
1. Entertainment and recreation – average weekly spend: $208
According to the Ruthven Institute, entertainment and recreation tops the leaderboard, accounting for 20.4% of our outsourcing spend – or about $208 weekly.
That doesn’t mean we’re hiring troupes of dancers to entertain us at home. Rather, it’s a measure of spending in clubs, pubs and casinos.
Savings tip
High mark-ups on alcohol can see a few drinks at your local watering hole burn a hole in your weekly budget. It’s possible to save by being picky about where – and when – you enjoy a few coldies.
At one popular pub in Sydney’s eastern suburbs, a bottle of Leftbank pinot grigio will set you back $44. Just eight kilometres up the road, a Newtown pub sells the same bottle of wine for $37. For supersized savings, have a night in and grab a cleanskin pinot grigio for $5.50 from Liquorland. Or, time your trip to the club or pub to coincide with Happy Hour, when drinks can be half price.
2. Financial services – average weekly spend: $205
Financial services account for 20.1% of total outsourcing, working out to a weekly cost of $205.
This category covers financial planning, funds management, new insurance products and banking services. These services can all be good for our financial wellbeing. But the findings do highlight the value of shopping around when it comes to choosing financial products – everything from everyday accounts to home loans and insurance cover.
Savings tip
A survey by money watchdog ASIC found only 12% of Australians received professional financial advice in the 12 months to March 2019, with many turned off by the cost. One in five of us would like advice, mainly around investing (45%). If that sounds like you, digital or robo advice could be a cost-effective solution. A report by Deloitte found robo advice can come with fees as low as 0.02%.
Or check out options for free financial advice like Centrelink’s financial information service (call 132 300). Your super fund should offer free general advice in regards to your super savings.
3. Health Services – average weekly spend: $181
In an ageing society, it’s no surprise we’re spending more on outsourced health care. This category accounts for 17.8% of outsourcing at an average weekly cost of $181.
While the Ruthven Institute found some of this money goes towards home nursing and aged care, the buck doesn’t stop there. This category also includes spending on personal wellness, an industry that has grown to be worth $US4.5 trillion globally.
Savings tip
There are certainly worse things to spend money on than personal wellbeing. However, costs like gym membership, trips to the day spa and organic smoothies can leave your bank account worn out.
Simple life changes can boost your wellbeing without breaking the budget. Health experts recommend walking for 30 minutes as a great way to improve or maintain your health. And it costs nothing compared to $100-per-hour-plus you could spend with a personal trainer. Save more by making juices and smoothies at home. Set aside some of the plain yoghurt for a 100% natural face mask.
4. Tourism – average weekly spend: $158
At 15.5% of our total DIFM spend, or $158 weekly, there are plenty of ways to save on travel. The Ruthven Institute said online platforms such as hotels.com, Trivago, and booking.com are making it easier for people to find, select, book and pay for travel. That doesn’t mean they always get you the best price. It can pay to shop around yourself.
Savings tip
Online booking platforms charge hotels a commission. Booking.com for instance, levies an average commission of 15%. This comes out of hotel revenue, so hotel operators will often offer discounts when you contact them directly. Use booking sites to check out the accommodation options in an area, then call the hotel directly to see if you could save. Be sure to read the fine print around cancellation policies.
5. Meals – average weekly spend: $90
Phil Ruthven, founder of the Ruthven Institute, said, “It’s little wonder meals make up 8.8% of household outsourcing spending ($90 weekly), as the rise of services such as Uber Eats and Menulog make it easy for people to have meals cooked and delivered.”
He added, “It’s an option which is increasing in demand as time-poor households take advantage of the convenience of outsourcing even the most basic of everyday activities such as cooking the evening meal.”
In fact, research by Roy Morgan shows meal delivery services have enjoyed “supercharged” growth as a result of COVID lockdowns.
Savings tip
Convenience always comes at a cost, and a weekly spend of $90 on home-delivered meals can take a $4,680 bite out of your annual budget. By way of comparison, Australians spend an average of $6,720 on total groceries annually, so home delivery is significantly more pricey than DIY dining.
Making home delivery a treat rather than a go-to option, will nourish your bank account. The planet will love it too. Food deliveries typically use single-use packaging, and research shows a single home delivery order can create up to 0.29 kg CO2 in greenhouse gas emissions.
Working out if outsourcing is worth your while
There are definitely times when outsourcing makes sense. Hiring a tradie to complete repair jobs around the house means you get the benefit of professional expertise without the need to fork out on expensive power tools.
The picture is a bit different if you’re thinking of hiring a cleaner or someone to do the gardening – jobs you could potentially do yourself. One way to decide if the cost is worthwhile, is to compare the hourly rate you earn at work to the rate you’re paying an outsourcer.
Let’s say, for instance, you outsource mowing the lawn, a job that’ll take one hour. You can expect to pay the median hourly rate of $45. If your own pay rate is $60 an hour, you’re in front – it costs less for someone else to do the task than your own time is worth. But if you’re on the minimum hourly wage of $20.33, you have to work for more than two hours just to pay someone else for one hour of their time.
How much could you save?
Based on the Ruthven Institute’s figures, we could be spending $842 each week on the top five outsourcing tasks. Not all of these costs will apply to each of us. However, if you could trim this cost by just one-quarter – by going easy on home delivery meals, asking hotels for a direct discount, skipping the gym or personal trainer, or enjoying more nights in and spending less at the club or pub, it may be possible to save $210 weekly.
That sort of saving can make a real difference to your wealth especially if you put the money to work. Here are a few ways to use savings on outsourcing to turbo-charge your finances.
Make extra repayments on your home loan
On the average (new) mortgage of $505,000 at the average rate of 2.77%, using $210 to make extra payments on your mortgage each week, can see you save up to $72,000 in total interest, and cut the time taken to become mortgage-free by 8.5 years. Check out Canstar’s Extra Repayments calculator to see what you could save.
Compare Home Loans with Canstar
If you’re currently considering a home loan, the comparison table below displays some of the variable rate home loans on our database with links to lenders’ websites that are available for first home buyers. This table is sorted by Star Rating (highest to lowest), followed by comparison rate (lowest-highest). Products shown are principal and interest home loans available for a loan amount of $350K in NSW with an LVR of 80% of the property value. Before committing to a particular home loan product, check upfront with your lender and read the applicable loan documentation to confirm whether the terms of the loan meet your needs and repayment capacity. Use Canstar’s home loans comparison selector to view a wider range of home loan products. Canstar may earn a fee for referrals.
*Comparison rate based on loan amount of $150,000 and a term of 25 years. Read the Comparison Rate Warning
Invest in shares or ETFs
Consider using your $210 weekly saving to invest in growth assets such as shares or get the benefit of diversification with share-based exchange traded funds (ETFs). Over the past five years, the Aussie sharemarket has dished up gains of 6.92% annually, meaning that $210 weekly saving could grow to be worth $63,000 in just five years.
Compare Exchange Traded Funds (ETFs) with Canstar
The table below displays some of the International Broad Based ETFs available on Canstar’s database with the highest three-year returns (sorted highest to lowest by three-year returns and then alphabetically by provider name). Use Canstar’s ETFs comparison selector to view a wider range of products. Canstar may earn a fee for referrals.
Add to your super
If you’re aged in your 30s, using those $210 weekly savings on outsourcing to make extra contributions to super can boost your final super savings at age 67 by a whopping $535,000. There can be benefits today too. You may be able to claim those super contributions as a tax deduction to ramp up your annual tax refund.
Compare Superannuation with Canstar
The table below displays some of the superannuation funds currently available on Canstar’s database for Australians aged 30 – 39 with a super balance of up to $55,000. The results shown are sorted by Star Rating (highest to lowest) and then alphabetically by provider name. Performance figures shown reflect net investment performance, i.e. net of investment tax, investment management fees and the applicable administration fees based on an account balance of $50,000. To learn more about performance information, click here. Use Canstar’s superannuation comparison selector to view a wider range of super funds. Canstar may earn a fee for referrals.
Fee, performance and asset allocation information shown in the table above have been determined according to the investment profile in the Canstar Superannuation Star Ratings methodology that matches the age group specified above.
Outsourcing isn’t always about money. It lets us reclaim time for more meaningful activities. In her book, Time Smart, Harvard professor Ashley Whillans said the happiness gained from outsourcing can deliver the equivalent feel-good factor of an $18,000 pay rise.
What matters is that you work out which tasks you can outsource to maximise the value of time reclaimed. Then look for ways to trim the cost. There’s no joy in being time-rich if it leaves you financially squeezed.
Cover image source: Monkey Business Images/Shutterstock.com
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