9 ways I learned the hard way how to save when times were tight

Hi there, I’m Andrew Spicer, Canstar’s CEO.

The cost of living crisis unfolding around Australia has resulted in an outpouring of people looking for help, and making changes to stop going backwards financially.

There are many helpful and free resources out there for people that need to make financial changes, whether big or small. One of our finance journos Amanda has written a terrific piece going through the ways you can systematically save money. It’s well worth a read.

I also wanted to share some of my own money stories and lessons from periods of my life when things were very tight for me. I haven’t always headed up a company, and I’ve definitely learned the hard way. Hopefully by revisiting my highs and lows, I can give you just one good tip.

1. I promised never to pay credit card interest again

My partner and I have fallen for most of the credit card pitfalls over the years. Credit cards aren’t for everyone. That said, the right card can work for you if used well, but if you’re a day late you start paying interest at 20 odd percent, and the costs add up fast. Even if you resume paying on time you still pay full interest until you get the card balance completely to zero during the month.

When we were younger we had so many stuff ups purely because we were unorganised. We ended up using a debit card, and kept the credit cards in reserve for big purchases and travel.

We now use a rewards card but we are very careful. Always check the ‘interest charges’ section in the statement to make sure it’s as close to zero as you can get it.

By the way, if you’re spending less than $2,000 each month, you most likely should be using a low rate card rather than a rewards card, because it’s unlikely you’ll earn enough points to cover the fees.

2. I moved to a cheaper city and didn’t look back

I lived in Sydney earlier in my career when son #1 was born. When we compared the cost of housing in Sydney and Brisbane, it just made sense to move. Not to mention the fact that Sydney traffic was killing us!

When we weighed up the pros and cons it was clear life would be better for us in Brisbane. We could have more space and live closer to the city for much less money. The schools were excellent, there was far less traffic, and we had more family support.

We’re not the only ones that made the move – 54,000 Australians did the same last year!

3. I realised the power of asking for a better deal

Housing is most people’s biggest cost, and with so many recent back-to-back rate hikes, some people are struggling to stay on top of their repayments. It’s also getting harder for many people who want to switch to a better loan to be approved by a new lender – particularly if their expenses have gone up (very likely!) and the value of their property has gone down.

That’s why it is worth asking your current lender for a better rate. I’ve seen first hand it can take just one phone call and ten minutes, and you might be able to save serious money. It’s all about ‘haggling’ – and it’s something we should all be doing more of. That’s particularly true if you have a good credit score, which you can quickly check for free. It’s also usually easier to snag a better rate if your loan is less than 80 percent of your property’s value – it gives you good negotiating power.

If you’re very worried about your repayments you can change to a lender that offers an interest-only loan, or switch to ‘interest-only’ repayments with your current lender. This means you won’t repay the amount you borrowed during that period. You can usually only do this for five years as an owner-occupier, and the downside is you will take longer to pay off your loan. You also need to be ready to switch to making higher repayments at the end of that period.

There are also digital-only loans coming from the majors that promise a quicker application and approval process (and often sharp rates), with CBA’s Unloan launching last year and joining digital home loans offered by fintech lenders like Tic:Toc as well as Macquarie, UBank and Qantas.

4. There’s nothing wrong with a homemade sandwich

Food is a major expense when you add up groceries, lunch, coffees, fruit shop, bakery, bottleshop and the rest.

If you spend $10 a day on lunch at work that’s around $2000 a year – and what have you got at the end to show for it? To save money in my 20s I used to show up to work with bread, ham and a tomato. People teased me mercilessly but it really did save money. It helped us pay down our biggest debt at the time.

I’ve found there’s still a way to enjoy your favourite indulgences when times are tough. We have always enjoyed a glass of wine, and when we were really tight we found a Sauv Blanc wine called ‘Sacred Hill’ that cost $2 and wasn’t too bad. I’ve just looked it up and it’s still only $4.75! That was our budget special, and we saved the better stuff for when we had something to celebrate.

5. Cars are the worst investment ever

When I was young I used to love cars but I got over that pretty quickly. They lose value every year. You’ve got to register, insure, repair and maintain them. Then there’s fuel and parking, the prices of which continue to climb upwards.

Our #1 son has managed to get to 30 without owning a car. He rides or catches the train to work and Ubers when he really needs to and manages to stay in front. If you’re young and have the right set up it can be a good tip.

We’ve had one car between us several times, once when I was a student in Sydney, briefly when we spent six months in London, and for a year after my car was stolen. It saves a lot but can be hard, particularly if you have kids signed up to endless school activities.

Yes it can be expensive, but if you can, try to rent or buy within walking distance of a train station. It can be worth compromising and getting a smaller place to be close to public transport. You save in fuel and parking and avoid the frustrations of traffic, which in Sydney has taken on mythical proportions.

6. No place for lazy taxes with insurance

Insurance is the ultimate grudge purchase. It’s really important, but it gives you no relief until you need it.

We recently had a massive hike to our home insurance premium. I was chatting to one of the insurers, who told me they were factoring in the higher cost of home repairs on the back of tradies charging more given the shortage of workers, and how much more materials now cost since COVID.

You can save money by comparing your car insurance and home insurance, and although it can be hard to make time, we do that every year or two.

After the most recent hikes we saved 30% percent on our home insurance by increasing the excess – the amount you need to pay before the insurer pays the claim. Doing this lowers the premiums you pay, but you need to weigh up whether you could cover the excess if you needed to make a claim. In our case, the main reason we have home insurance is to protect against major damage such as fire and flood, and we don’t claim on small things, so we’re banking on ending up in front.

As with lenders you can ring your insurer and tell them you’re leaving unless they match a competitive quote.

7. Don’t pay the lazy tax on electricity

I arrived home one day and the house was empty and unlocked, every light was on, the air conditioning upstairs was on heat and downstairs was on cool. We suspect it was our 14-year-old son, but like many things at the time it was blamed on ‘Mr Nobody’.

That quarter we got an electricity bill that was so large I’m too embarrassed to write it here.

Anyway, we went into frugal mode to help make up for it. We changed the lights to LED. We fixed the pool pump. We cleaned the air con filters. We turned off lights. The bill did come down a lot. Comparing electricity providers to make sure you’ve got a good deal will help too.

8. Shop smart with clothes and furniture

I’m getting into dangerous territory here, as these things are very personal. They are also potentially very expensive.

In tight periods we have bought furniture from Vinnies, and we still have a timber cupboard from Vinnies in our ‘good’ room that has stood the test of time.

Our boys are masters of Facebook Marketplace, and have really gotten into using it to buy couches, TV units and bbqs for the units they rent.

Personally I love Barack Obama’s idea of a ‘uniform’. He wore a dark suit, white shirt, and a red or blue tie and he spoke about the time it saved him in the morning. I’ve adopted the uniform of ‘Canstar t-shirt, jacket and jeans’. I buy more time in the day, and it also saves money. I buy new jackets every year at the Black Friday sales.

9. Do your homework when it comes to health costs

Income protection is particularly important for young families, self-employed folk and for people who have investments funded by debt. It does get expensive, particularly as you get older. You can save money by increasing the ‘waiting period’ from 30 to 90 days if you’re happy to take on that risk of not being covered earlier. It’s important to make sure you have enough in emergency funds or savings to fall back on.

If you’re a smoker and want to kick the habit it will help your bank balance and your health. Here’s a number that will blow you away – 80%. That’s how much higher your life insurance premiums can be if you’re a smoker.

You should also check what life insurance your superannuation fund gives you as most come with some automatic cover (called default cover), with premiums typically deducted from your super balance regularly. Life insurance within super is typically cheaper than a policy you’d take out directly, but the cover may also be more limited.

Health insurance is another area where you can cut costs simply by shopping around for a better deal, or by reducing your level of cover, for example by having less extras. It’s good to remember that you can now keep your kids on your family policy until they are 31, which saves them money.

If you choose to take out health insurance it’s important to do the work up front to make sure you’re getting value from your policy. Are you paying for extras cover to help with rebates for services you will actually use? Are you paying for pregnancy cover you don’t actually need? And if you change, beware of ‘waiting periods’ and make sure this couldn’t backfire if you need that cover earlier.

So, there you have it – my biggest finance lessons and the changes that made the biggest difference to me. I’m hoping there is even one tip in here that helps, as I know how hard many people are doing it right now.

Cover image source: SewCream/Shutterstock.com