© Provided by Are Media Pty LtdDon't let household costs get on top of you. With a few tricks up your sleeve you can trim expenses with ease. Here are five strategies for trimming household expenses
For many of us, household bills seem to be on a northerly hike while our savings are headed due south. But it doesn't have to be that way. Here are five strategies for trimming household expenses.
1. Get on top of your debt
More than 10 per cent of Australians take 6-24 months to pay off their Christmas debt. If you or a relative is struggling under the weight of Christmas credit-card debt, it's time to take action.
© Provided by Are Media Pty LtdRestore your financial and mental health by putting a plan into action to pay off debt ASAP.
- Contact the credit provider and ask for the hardship department so you can organise a repayment plan.
- Arrange to have credit-card repayments taken from your bank account on pay day.
- Consider a 0% balance transfer offer to minimise interest payments and pay your debt down faster. As well as the transfer fee, pay attention to the annual fee on the credit card and what rate you'll be charged when the promotion ends. The right choice depends on how much you owe and what you can afford to pay each month. And of course, don't make any new purchases; just focus on clearing the debt.
- Consolidate debt: If you have several debts, consolidation might be an option. This involves rolling over all debts into a single loan, whether they're personal loans or mortgages. The best thing about consolidating your debt into a personal loan is that you make one repayment each month instead of several. In addition, you know that at the end of the loan term the debt will be repaid and out of your hair forever.
2. How's your health (insurance)?
Rising health insurance premiums have been making the news recently, but there's only so much you can do to trim the premium before your policy becomes worthless. The average health-insurance policy has skyrocketed by 29.75 per cent over the past five years, with families now paying about $4200 a year for a combined hospital and extras policy - up from $4040 a year ago. So what can you do to reduce this overall cost?
- Mix and match Use one provider for hospital cover and another for extras.
- Consciously uncouple There is no benefit in having a couple policy. Two singles may be better as you could remove obstetrics for the male partner while keeping it for the female partner who may be trying to conceive.
- Keep items on ice You can 'turn off' items you don't need to be covered for in the immediate future. Take care as premiums may reduce, but you'll need to serve waiting periods again if you switch them back on.
3. Take the shock out of power bills
We spend an average of $1700 a year on electricity, and that means there's plenty of room to save. If you live in an area where there's a choice of providers, head to energymadeeasy.gov.au to see if you're getting the best deal or if you could save by switching to a different retailer. Have your latest electricity bill handy for accurate usage rates.
© Provided by Are Media Pty LtdSwitching to LED globes can shave hundreds off your yearly electricity costs. Photo: Paul Urizar | Styling: Kate Nixon
- Cut your energy bill by up to 10% just by turning appliances off at the power outlet when not in use.
- Set your air-conditioner to DRY mode This can virtually halve the cost of running your air-conditioning while still drawing out enough humidity to keep your home comfortable. Regularly clean filters to keep your air-con running efficiently.
- Ditch the second fridge One in four homes have a second fridge, and it can add an extra $172 to your annual power bill - more if it's an older model.
- If you're buying new appliances, look for a high star rating energy-efficient appliances can cost more initially but work out cheaper over time. For instance, a flat-screen TV with a high star rating can cost $60 a year to run, compared with $148 for a TV with a three-star rating.
4. Make talk cheap
People with mobile phones spend an average of $77 a month on their plans - more than double the average spent on prepaid plans. Here are four ways to save:
- Know your usage Data is a big budget-buster, with 40 per cent of phone users regularly exceeding their data cap, which is costing us an extra $300 million annually. Avoid excess data charges by knowing your usage patterns (take a look through some of your recent bills) and make sure your plan is right for your needs.
- Swap to a SIM-only month-to-month plan This kind of plan costs an average of $36 per month and, along with the potential to save, you're not locked into a plan with the same telco for several years.
- Bundle Consider a bundled package or data-sharing plan that lets you transfer data between your home WiFi and mobile device.
- Give the little guys a chance Look beyond Optus and Telstra to find a generous serve of savings. Hive's $9.80 1GB SIM-only plan took out the gold award for Money's 2019 Best Value Mobile Plan (Low Usage), while TPG's T4G Medium plan won the award for high usage, with 10GB for $29.99 a month.
5. Mull over your mortgage
You can potentially save more than $22,000 in interest by refinancing a $400,000 30-year loan to one that's just 0.25 per cent cheaper. First, though, you need to do a break-even analysis. Add up the costs of refinancing and then divide by your monthly repayment savings. This will give you the number of months you need to recoup the costs. So if, for example, it costs you $1000 to move but you would save $50 a month in repayments, your break even period is 20 months, meaning it will take you just under two years to recoup the cost of moving. If you can't refinance but you're still underwater on your home loan, you still have the following options:
© Provided by Are Media Pty LtdBy renting out your home and living somewhere cheaper, you may be able to better manage your repayments.
- Apply to your lender for a hardship variation This usually comes in the form of frozen repayments, frozen interest rates and/or partial repayments. It is important to note that interest will still be added to your mortgage.
- Access your super You may be able to dip into your super on compassionate grounds. The most you can get from one fund in 12 months is three months of repayments and 12 months of interest on the balance of the loan. Release is given only if your lender is threatening to sell your home and you can't pay the arrears any other way.
- Move out or sell up By renting out your home and living somewhere cheaper, you may be able to manage your repayments. Selling is a hard decision, but it's better to do it yourself rather than have the lender take it as you're more likely to get a better price and avoid legal costs.