No matter who we are, we all have to find a way to live within our means. It doesn’t matter whether our finances allow for annual overseas holidays or require us to keep a careful eye on our grocery bill – almost no-one has unlimited funds to spend.
Over the years, our family income has varied quite a lot – from our reasonably flush late twenties, when we were childless and both working professional jobs; to our mid-thirties, when it all came crashing down with retrenchment and cancer. It took us a long time to figure out how to live within our means, but as we approach our fifties, it feels like we’ve finally got it sorted.
Here are a few life lessons we’ve learnt along the way…
Be prepared for an emergency, because one will come up
When we were young and bulletproof, we thought statements like this were melodramatic and alarmist. But as we now know only too well, life can literally pull the rug out from under our feet in a heartbeat. It’s almost impossible to anticipate the unexpected, but we can be just a little prepared for it, at least financially.
The conventional wisdom espoused by financial planners is to stash away three to six month’s worth of living expenses as a contingency fund. That’s a great goal to aim for, but much harder to achieve in practice – if a family is barely meeting their monthly expenses, how do they find three times that amount to tuck away? The answer is: slowly and incrementally. I have friends who prepare for emergencies by ensuring they have adequate credit on their mortgages – it works well for them. Either way, having some access to funds when a crisis hits can avert potential disaster, or at least soften its blow.
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Save whatever you can on recurring expenses
Saving on a one-off expense (new car, holiday) is great, but finding ways to save money on the stuff we buy every day/week is the true secret (in my opinion) to living affordably. And if it’s done creatively, it can be both painless and empowering.
My friend Smidge wrote an excellent blogpost comparing her two local supermarkets. There was a cost difference of 16% between them, and that was for the same products from both stores – she wasn’t comparing brand names to generic labels. She found she could make a saving of $56 in just a few weeks’ worth of purchases – over a year, that’s a saving of over $800 (and that’s after-tax money).
By contrast, John Birmingham of the Sydney Morning Herald wrote about his $4000 a year takeaway coffee habit. I know that sounds crazy, but in Sydney prices, that’s equivalent to just two or three coffees a day.
Saving money like this takes a little thought and planning, mainly because we need to undo all our unconscious spending habits. For example, until we started making our own, it had never occurred to us that buying yoghurt was an expense we could save on. These days we make two litres a week for just $1/L, a saving of $10 each week, or $520 a year. And that’s just on yoghurt. By baking our own bread, we save about $1,000 a year (and we’ve been doing that now for over seven years).
Taking a good hard look at where the money goes isn’t always a pleasant process, but it can be very enlightening. There are a multitude of ways to trim dollars from our regular expenses, but sometimes it just doesn’t occur to us that it’s possible. It takes a little bit of lateral thinking, but it’s surprising how quickly the savings can add up. For example, $4 for a cappuccino might seem like nothing (it’s just two small coins), but one a day will amount to nearly $1,500 a year. I’m certainly not saying a daily coffee is a bad thing, but it’s important to be aware of the cumulative cost of all these seemingly little things.
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DIY – Make it, Bake it, Grow it
I know our individual life circumstances are all different, and not everyone has the time, space, or inclination to make things from scratch. The last thing I ever want to do on this blog is to make anyone feel bad – the way we choose to live our lives works for us, but it might not be right for you.
Having said that, our key to living within our means has been to make as much as we can from scratch. Doing so has allowed us to provide ethically-sourced, premium quality food for our sons, while keeping to a workable budget. Again, we’ve had to be resourceful to do this – we’ve tracked down wholesale suppliers of grassfed and free range meat, learnt to grow edible crops, and experimented with recipes. It all takes time, but it’s worth it.
More importantly, every little bit of it is worth it. That’s one of the main reasons I write this blog – I don’t expect anyone to try all the different things we attempt, but I know that even just one thing – be it baking your own bread or growing herbs – can be incredibly empowering.
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Make your own gifts
Even though this probably belongs in the point above, Pete thought it was important enough to warrant its own heading. First world gift-giving can get crazy – I have a friend whose Christmas shopping for her family alone costs her thousands of dollars every year.
These days, we buy very few gifts. Most are now homemade, and in the past couple of years, they’ve almost always been chocolate (even as a 50th birthday present).
Over the past twenty years, we’ve made polarfleece beanies, beeswax candles, crystal jewellery, fruit cakes, cookies, Christmas decorations and jams as gifts. None of these items used “cheap” ingredients, but they were all reasonably economical to make, particularly compared to buying the finished item. In addition, they were unique, made with care, and greatly appreciated by the recipients.
Mastering one skill well – be it sewing or baking or basketweaving (or just about anything else) – will enable you to create unique gifts for your friends and family that will make them feel loved. You’ll also save some serious dollars in the process!
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Explore free and discounted services
Libraries. Parks. Art galleries. Our cities are filled with thrilling and exciting things which cost absolutely nothing. I’m not a particularly good library user (as I prefer all my books in electronic format), but thanks to my friend Roz, I’ve become a keen art gallery visitor. With the Sydney Biennale just around the corner, it’s going to be an exciting year in my city. What’s happening in yours?
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Patience and perseverance
Achieving an affordable lifestyle isn’t a result of luck. And it certainly isn’t an automatic byproduct of a large income – some of the highest salaried folks I know struggle with their cashflow.
Rather, it’s about patience and perseverance. Patience to save up and wait for things rather than having them immediately, and the perseverance to keep plugging away at it; saving a few dollars here, figuring out a smarter way to do something, and tucking a little bit away for a rainy day. And if there’s one thing I’ve learnt over my thirty years of adulthood, it’s this: it all adds up. The little changes, the frugal mindset, being consistent in watching the dollars – it doesn’t amount to much in a few weeks or months, but over the course of years, it can make a huge difference.
Achieving financial equilibrium – finding that sweet spot where our expenses don’t exceed our income – can lead to a less anxious, more contented lifestyle. It’s definitely something worth working towards!
Fig Jam and Lime Cordial 