In the chapter above we covered why reducing expenses beats increasing income – so where do you start? Below you will find a detailed list of many ways to save money, find ‘lost’ money, and ensure ongoing savings. However, before you jump ahead, let's make sure you have all the right information to help you on your journey! Specifically:

• Mindset - why it is an important place to start
• Easy wins
• Pay yourself first - the power of automation
• Final thoughts on easy wins and paying yourself first

Mindset – why it is an important place to start

There is a lot of research on how money management and decisions are ruled by emotions more than mathematical sense. While we can never remove the psychological side of money management, we can reduce the negative impacts emotions might have on your financial decisions.

If you read the below list with a closed or fixed mindset that “This is going to be horrible, I’ll have to cut all my spending and never have any fun” then you will very likely feel the pain every step of the way. It will feel restrictive and there is every chance you won’t take the steps needed to reach your financial goals.

However, if you work through each option, even the ones that seem radical* to you at first with an open mind, or a growth mindset you will be better able to look for ways to make it work, rather than focus on why it cannot.

* we are more about sustainable changes, not being radical so there is nothing too scary below

If your initial response when you read each example of how to save is a negative one, I challenge you start to explore that a little more and ask yourself;

• Can we trial it short term?
• How can we make this happen?
• What do we need to set up to allow us to do this in the future?

If you ponder those sorts of open questions, the answer might not come to you straight away, however, your brain will automatically start to search for answers. Let’s use that power of your subconscious to start to notice the ways that will support our savings efforts. Look for others who have achieved what you want and ask them how they made it work for them. Start to notice the ways your neighbours, family and friends, or others save money and find ways that will work for you.

You can start small with just one thing at a time until your confidence builds up, you reflect and realise it isn’t all that bad after all and you start looking for ways to save even more.

Ok so let’s get into it and find you some easy wins to get you started.

Easy wins

Here we will breakdown your easy wins into five main categories starting with what we hope will be the easiest for you to achieve. As you go along make sure you write down in the right-hand column on the checklist below how much you saved at each step. As you see the numbers add up it will positively reinforce what you are doing, which provides a motivation to continue.

Claim your ‘free’ money

If you were walking along and dropped $20 on the ground would you pick it up? I would. How about $1? Still a yes from me.

I wouldn’t throw away my money and neither should you. There are millions of dollars out in the world that Australians haven’t taken any responsibility for. Make sure none of that is yours.

Your lost super may be held by your super fund or by the Australian Taxation Office (ATO). It's easy to find your lost super online, just sign into your myGov account linked to the ATO and click on “Manage my super” or if you’d prefer you can get a paper form from the ATO website.

Cancel

This will be an easy win for some. Anything you are signed up to on a subscription basis where the money is automatically deducted from your account each month can be easy to forget about. Now is the time to reassess and see if they are adding any value to your life or if they can be cancelled. Go through your bank or credit card statement and look for anything that is set up on auto payment, it could be things such as:

• Any free trials you have signed up to with the intention to cancel before they deduct the first payment – set a reminder and make sure you don’t get caught out
• Multiple accounts for similar services. Do you really need 3 or 4 streaming services; I’m looking at you Netflix, Hulu Stan, YouTube premium, Anime Premium. Choose your favourite 1 or 2 if you absolutely must have them (I don’t) and ditch the rest.
• Subscriptions you haven’t used in the past three months and/or are unlikely to use ongoing
• Magazine and newspapers
• Online memberships or clubs
• Anything else you forgot you were signed up to

Negotiate

For anything you aren’t able to cancel, you should at least review and shop around for a better deal and negotiate where possible. You may have signed up to a great deal last year, though if you don’t review this again you may be hit with a ‘lazy tax’ where the premiums are increased for subsequent renewals in the hopes that people don’t check again. Some areas you should shop around include:

• Bills – phone, internet, electricity
• Insurance – car, homes, contents, life, income protection
• Multi Policies – ask for a discount if you hold more than 1 policy with the same company
• Mortgage/Loan interest rate – ask for a deal every 6-12 months, with interest rates currently at record lows you might be surprised how much your lender is willing to do to keep you
• Settlement payment for debt – if you plan to pay off debt, you can negotiate the final amount to be paid. (See back in Chapter 4 for more detail on negotiating debt.)

Consolidate

Saving money comes in many forms. Some you can see in your bank account straight away, such as those you cancelled or negotiated above. Others you may not see immediately however add up over a lifetime. These are usually the result of having multiple accounts that charge fees for essentially the same service. The two largest in this category are:

• Superannuation – As of 30 June 2018 approximately 6 million Australian’s had more than one Superannuation account. Having multiple super accounts could mean you are paying extra fees and charges which may reduce your overall retirement income. To consolidate your super sign into your myGov account linked to the ATO and click on “Super” and “Transfer Super” (this option will only appear if you have more than 1 account).
• Debt – If you are new to the Financial Independence space you may still have some debt to get rid of. If you do, I encourage you to review the interest rate for each of your debts, and research whether consolidating into one debt with a lower interest rate will be beneficial to you.

The BIG Three

According to the Australian Bureau of Statistics Household Expenditure Survey 2015-16, the average Australian spends about 52% of their take-home money on just three things; housing, food and transport. What better place to look for ways to save than where you know a huge chunk of your money is going?

Housing

Let’s start with the biggest one first. We all need somewhere to live right? Whether you rent, own already or are thinking about buying, if your total housing costs are as low as possible you are already winning.

If you are currently handing over any more than 25-30% of your hard-earned for a basic necessity such as shelter, think about how you could reduce this cost. Everyone’s personal situation is different, so some may absolutely not be possible for you. Some ideas:

For everyone

• Rent out a room – having more people cuts not only the cost of shelter but also bills
• Move to an area with a lower cost of living
• Pay for only space you will use. Why is everyone obsessed with having a guest room when it isn’t used 90% of the time?

For renters

• Negotiate your rent if paying above the current market or looking to stay longer term

For owners

• Ensure you are getting the best interest rate possible on your mortgage every year
• Rent out your spare room as an office/storage space
• Pay your mortgage weekly or fortnight to reduce interest
• If you aren’t ready to stay in one place for at least 10+ years then consider renting instead of buying as buying/selling costs are so high
• Look into an offset account and see if it would benefit your situation

Food

The second largest expense in Australia is food. Are you eating your money? Or throwing it away?

In 2015/16 the average food expenditure for groceries and non-alcoholic beverages per person aged 25-34 years old was $2,675. In addition to this, the average cost of eating out per person for the same age cohort was $1,917 per annum.

That’s almost $2,000 per year you could save by not eating out. Though don’t worry, I did say this was about sustainable changes and not making you miserable so instead of cutting all of your eating out budget cold turkey let’s look at some other options to optimise your money here.

Tips for saving money on food:

• Consider generic brands for items that taste the same
• Buy in bulk and in season
• Meal plan – then only buy what is on the list
• Use what you buy – approximately 20% of all food gets thrown out each week
• Stock up when items are on special
• Cook at home as much as possible
• Don’t go shopping while hungry
• Eat out only on special occasions – then they’ll feel more special

Transport

The third and final largest expense is transport. Depending on where you live, you may be able to save on transport by:

• Travelling at off-peak times for a cheaper fare
• Questioning whether you really need a car for each person in your household or at all?
• Rideshare (Uber, Didi, etc.)
• Use Public transport
• Commute by bike
• Walk if you are travelling local

Pay yourself first – the power of automation

Look at all those savings! What’s next?

As we discussed at the beginning of this chapter, psychology plays an important role in your money. In this step, we want to remove that emotional aspect and instead automate the process and take away any decision that you may sabotage depending on your emotional state at the time. You want to ensure all of those savings you’ve found don’t get whittled away slowly with lifestyle inflation. It can be easy to see a pile of savings and let them slip through your fingers by spending just a little more over a period of time.

When you prioritise saving first, you are telling yourself that your future and your goals are the most important thing – not the bills or the bank. This is a powerful motivator. So how do you set it up?

1. Calculate your take-home pay
2. Set yourself a savings goal (hint: lots of people in the FI community aim for 50%, however you can start smaller and work your way up)
3. Find a bank that will let you set up multiple accounts or sub-accounts with no account keeping fees, ideally paying a high-interest rate
4. Ask if your employee allows salary splitting, otherwise set up automatic transfers to come out each pay before anything else
5. Watch your savings grow. Review and adjust on a regular basis

When you make paying yourself first a priority, you have to learn to live on the rest. This forces you to make hard choices and prioritise spending on what truly matters to you.

*Automating your savings is the best way to ensure you don’t spend your future millions.

Final thoughts on easy wins and paying yourself first

We hope that you were able to find some easy wins in the list above to help you kick start your FI journey. Some may have been large, others small; however every dollar you save now on everyday expenses means $25 less dollars you need to fund your future self.

Your personal financial situation will change many times over your lifetime. Remember to regularly review and adjust as needed and challenge yourself to increase your savings by small amounts as often as you can.

Keep reading for even more ways to boost your savings rate and gather money for your FIRE pit.

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About Miss Balance from All About Balance | allaboutbalance.com.au

Miss Balance writes at All About Balance, a blog about reaching financial independence while still having a life! On the blog, you can read her tips and tricks on saving, investing, and growing your income. She maintains that it is possible to do this while sustaining strong relationships, as well as a healthy body and mind. If you’d like to learn more about how you can build a life you don’t want to escape from.

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NOTE: Aussie FIRE is a free educational resource prepared by Pearler, with permission from the co-authors. At Pearler, we strive to make investing for your long term goals easier and fun, but we only provide general information and/or general advice. We don’t present you any options based on your personal objectives, circumstances, or financial needs. Any advice is of a general nature only. All investments carry risk. Before making any investment decision, please consider if it’s right for you and seek appropriate taxation and legal advice. Please view our Financial Services Guide before deciding to use or invest on Pearler.