How we saved a listener $3000 a year

Jess and Dom have money saving tips for a listener looking to purchase a home using their Super after retirement.

It All Adds Up is the podcast where we make money easy to understand so that listeners can begin building their financial wealth. You can submit questions to [e-mail] for Jess and Dom to answer each week.

See omnystudio.com/listener for privacy information.

Episode Transcript

S1 (00:07):
Hello and welcome to It all adds up. The podcast
where we chat about money, how to get it, how
to spend it, and how to invest it. I'm senior
economics writer at the Sydney Morning Herald and The Age
newspaper's Jess Irvine, and.

S2 (00:19):
I'm money editor Dom Powell. And this week is the
grand finale of our special series focusing on real life budgets,
money questions, and how you're tackling the rising cost of living.

S1 (00:28):
Yes, In this week's question comes from listener Sarah, who
sent us in her budget and then she, in the interim,
listen to the other budget episodes that we've done and
went away and actually saved herself a couple of thousand
dollars following some of the tips and tricks that we mentioned.
Dom So yay! Us Yeah.

S2 (00:47):
Well, who who knew? Who knew that we're actually giving
good advice on this podcast?

S1 (00:51):
We knew deep down inside, but it's nice to have
that external validation. Anyway, we have a voice memo from Sarah,
so let's have a listen.

S3 (01:01):
Hello, Jess and Dom. My name is Sarah, and I'm
a paramedic and a 50 year old soul parent to
two beautiful girls, 28 years old and 16 years old.
Thank you so much for scrutinizing my budget. I've been
looking at various ways that I can make some savings.
And recently I've managed to make some changes with my

(01:22):
health insurance by reducing it down to just hospital only
and no extras and having a bigger excess and reduce
that cost from $274 a fortnight down to 150, which
was amazing. I'm looking at other ways that I can
save because my overarching goal is in 15 years time,
I plan to purchase my home outright at retirement and

(01:46):
still have a great retirement savings plan as well. So
any ideas on how I can save some costs and
increase my surplus would be most amazing. Thank you so much.

S2 (02:01):
Well, thanks for sending that in, Sarah. Love to hear
that you've been listening to the podcast and, you know,
implementing some of the some of the things that we've
been talking about. I think there's a few things to
look at when we look at Sarah's budgets and the
things that she's she's changed. So if we look at
the first budget that Sarah sent us a few weeks ago,
she was saying that her annual cash surplus was around
about 4000. And in the MOStrillionECENT one that she's sent

(02:25):
us just this week, she's increased that cash surplus to
around 7000, which is great. That's 3000 bucks extra in
the pocket.

S1 (02:32):
And that's per year. It's not every month or something,
but but that's how much she's perhaps can save annually.
But that's fantastic because, you know, 4000 might be a
bit slim. We're getting towards something that's a bit more
of a decent sort of cash surplus being generated each year,
which isn't that great.

S2 (02:49):
Yeah, absolutely. And I mean, there's a few reasons when,
you know, when when you look at Sarah's budget that
she's increased this cash surplus. One of the most notable
things that I saw was that she's increased the amount
of money that she's gotten from her side hustle, which
I believe is, I assume, teaching Pilates. It just says Pilates.
I can't imagine you can get paid for doing Pilates,

(03:11):
but if you can, someone let me know, please. But
I'm assuming that Sarah does do Pilates instructing as a
side hustle and she's increased the amount of money that
she's gotten from that quite significantly. So this is great.
And also a real testament to the strength of having
a good strong side hustle.

S1 (03:27):
That's a fantastic, solid side hustle. And I did read
that it's the number of Australians who are actually sort
of have two jobs at the moment is increasing because
you know, you are looking for that extra source of
income on the saving side as well. So she mentioned
that she saved on her electricity and the health insurance
as well, noting that if you increase your excess, you

(03:47):
have to pay more in the event that she will
have to make a claim. So just being careful of
that and dropping the extras because you don't need the
extras to avoid the Medicare levy surcharge, if you're over
that 90,000 single income threshold where you have to pay
that tax slug, if you don't have the hospital cover,
you only do only need the hospital cover. But sort
of doing an analysis for yourself as to whether the

(04:08):
benefits you get from having health insurance extras you actually
receive back more than you pay in premiums is a
really good exercise for people to do. And it sounds
like Sarah's gone away and done that analysis and figured
out that, yeah, she can reduce the premium by, you know,
$100 or whatever it was. That's that's fantastic.

S2 (04:26):
Yeah. And it looks like she's also cut down on
her expenditure, not by a huge amount, just by, I
think it was maybe 20 or 30 bucks a fortnight
or something like that on just doctors and specialists. So
clearly Sarah sat down and had a look at the
money that she's spending on, you know, health and health
insurance and sort of just really worked out all the
areas that she can she can cut back on, which
is great, getting rid of any of those sort of

(04:47):
non-essential sort of specialist visits or doctor visits is always
a good way to save a bit of cash.

S1 (04:54):
And I noticed she's also cancelled her audible subscription for
the for a little while. And that obviously saves money.
But the great thing about that, I don't know if
you've ever done this done but I mean I have
had audible and then you cancel it and then you
get bombarded with come back, it'll be free. We won't
charge you for a whole month or two. Like you
get the free offers so you can resubscribe anytime you want.

S2 (05:17):
Audible is one of those things that I think is
almost always sending me deals like I've never done. I
think I've ever been sent so many offers by a
company other than Audible like in my life. Like it's,
it's ridiculous. And I don't even listen to audiobooks. I
think I listen to one audiobook maybe once in 2018. So,
you know, there's a life hack through everyone, get rid
of your audible and then you can, you know, just

(05:37):
get free offers for the rest of your life.

S1 (05:39):
John What did you think in general? I mean, I mean,
I would now claim this is a testament to having
a budget and seeing how realistic it is and tracking
your spending and, you know, finding those little savings, because
we saw that Sarah was doing sort of more a
bucket style approach, which is traditionally what you've been doing.
How do you how do you feel about that?

S2 (05:58):
Well, I think this is. If you, you know, listen
back to the first episode of this series that we did,
you know, six weeks ago now, where I sort of
admitted my terrible budgeting strategies. This all sort of hits
quite close to home, to be honest, because Sarah pretty
much said, I did this, these sort of strategies. I
did this sort of, you know, bucket based approach, and
all I kept doing was just dipping into the buckets,

(06:20):
you know, I kept going and taking a little bit
out of this fund, a little bit out of this
fund when I needed it. And that's exactly what I do,
you know? So this is this is this is I
suppose you're right, a testament to having a real budget,
meticulously tracking every single thing you spend money on rather
than just sort of grouping it into generalized categories. Yeah.

S1 (06:40):
And like, look, you don't have to do it forever,
you know, you don't have to be doing this every
single month, although you can if you're me, but just,
you know, doing it once, having the really good, fine
tooth comb through the budget, questioning everything as to whether
it does align with your enjoyment of the the dollars
that are going out and having a look for sort

(07:02):
of those little savings because it all adds up.

S2 (07:05):
As all add up. I think the buckets method can
be very attractive for a lot of people because it
seems very low effort. And I think that if you
have a really simple life, right, like if you've if
you don't spend money on sort of strange things, you know,
you've got very limited, you know, expenditure, you've got very

(07:25):
basic expenses, all that sort of stuff, then the buckets
method works well because then, you know, you don't have
to really think too much about it. But when you're
buying a little thing here or are you spending a
little bit money on a holiday here and all that
sort of stuff, then you really do need to have
that oversight, I think, which is where obviously we've seen
this with Sarah's budget here, that now once she starts
tracking it all, she can really see where all that

(07:47):
money's going and then start to make those savings.

S1 (07:50):
Yeah, And it's not about sort of living on a
barebones budget for the rest of your life and cutting
your own hair as some of us in the room
have done. It's me. But even though I've been on
that arc of, you know, sometimes it's fun to see
how much you can save, but you can't live like
that forever. And making sure that you're making room for
enjoyment in your budget is so important. Although things are

(08:12):
a bit tight at the moment for a lot of people.
So having the good look but you know, making sure
that you do have some some fun in the budget
as well. But looking at.

S2 (08:20):
The rest of Sarah's budget, there are some areas where,
you know, you can see that there will be some
cost savings in the future. As she mentioned, she has
a 16 year old daughter at the moment. She shows
on her budget that her school costs are around $10,000
a year. Obviously, that will stop eventually, and that's $10,000
that you could do anything with. You could invest it,

(08:42):
you could put it into your super.

S1 (08:44):
So it might be fun for Sarah to do a
different version of her spreadsheet where you do actually go
through and cut out some of those kid costs. Because
I've done that and I'll be living a life of Riley.
I'll be fine. Yeah, kids are expensive. So I think, yeah,
particularly planning for retirement, that's that's something that's going to come,
come out. I do also see that there is quite
a high spending on holidays which, you know, in her

(09:06):
email Sarah said she wants to live now as well.
You know not just to be saving only for future
her but also have a good life with the holiday front.
But that is something that can be wound back, I guess,
if things get much tighter. She's also spending $1,500 on hairdressing. But,

(09:27):
you know, aforementioned tips.

S2 (09:30):
You got to suggest that Sarah cuts her own hair.

S1 (09:33):
You know what? I don't think I am going to
because I have done it. It's really stressful. So I
am building hairdressing back into my to my budget. But
I do also get a bit shirty because I feel
like women have to spend more on haircuts. So yeah,
I mean, elsewhere we've got about $700 a year for clothes,
which seems pretty reasonable, $600 a year set aside for gifts,

(09:55):
which I'm, I find I spend a bit more than that, actually,
you know, some streaming services. You can't cut out everything.
We need to to live. And what's really nice to
see is Sarah also puts aside, you know, over $500
a year for charity donations. So that's another benefit of,
you know, looking at your money and having a plan
for it. You can set aside some some feel good

(10:16):
spending money and that's certainly appreciated.

S2 (10:19):
Some feel good tax deductible spending money.

S1 (10:22):
Well, that is true. Do not forget to claim that
on tax, Sarah, at the end of the financial year.

S2 (10:29):
We'll be back in just a moment. Now I feel
like we should get into one of Sarah's major questions,
which was her plan to purchase a home, I believe,
in about 15 years once she's retired and presumably using
her superannuation, which she will have access to purchase her

(10:52):
house now. Obviously there's lots of ways that this could
go and the ways and ways that you could do this.
But Jess, what do you think about that as a
sort of a plan?

S1 (11:01):
Yeah. Well, I've always wondered with my mortgage if it will,
it is so big that if I will be at
a point where I may be able to use some
of my super when I access it, you have to
make various conditions of release, but they can kick in
from the age of 60. Whether I might use some
of my super money as a lump sum to pay

(11:22):
off my mortgage. And we're seeing that many people are
keeping their mortgages into retirement and doing just that. So
I guess Sarah's doing another version of that where, you know,
she's putting all the money into super and she's got
a nice healthy nest egg there. And she's working in
a sector where she gets a pretty generous rate of
contribution from her employer and she is topping that up

(11:44):
as well with extra contributions. So maybe it grows in
whatever the assets are there, not in property because she
hasn't bought the property yet, but it grows and there's
great tax deductions. And then if you can pull it
all out at the age that of 65 seems to
be what's in her plan and then purchase the property.
You know, you're making a you're making an asset allocation

(12:05):
decision there. And my main thing and I would feel
bad if I didn't sort of at least put this
in the mind is things change in super. And I
have always wondered if one of the things that might
change would be if they put conditions around whether you
can access the money as a lump sum. There is
no suggestion at the moment about that, but there is

(12:26):
talk about shifting people towards sort of pension based super
payouts so that, you know, you're sort of you're withdrawing
a certain percentage of your balance each year rather than
taking it all out. And some people are not as
responsible as Sarah and buying a home, but, you know,
go to some great holidays and then living on the
age pension. And so I think that's just something to
keep in mind. And we can't give financial advice about

(12:48):
that sort of thing. But, you know, just being just
keeping an eye on that, I guess if the plan
is to use the super to buy the house.

S2 (12:56):
Yeah. And I think that if we've been shown anything
from the recent debate over super in the past few weeks,
is that any sort of changes to these these systems
will be telegraphed well ahead of time. You know, there
will be you know, you'll you'll have a good few
years to sort of work it out. So like let's
just say, you know, that does something like that does happen.

(13:18):
You'll have a long time to be able to sort
of plan for it and potentially work around it and
do something else. Something else I would also mention with
sort of Sarah's plan here is that I think, you know,
it's got a lot of merit, but there is the
sort of the downside that she will be paying rent
for the next 15 years, which just obviously, you know,

(13:39):
never feels great in terms of an investment. You know,
people sort of say that rent is like dead money
in a sense, which is not something I necessarily agree with. But,
you know, there is a bit of a downside to
to not putting that into a mortgage.

S1 (13:54):
Yep. There's the rent is the dead money. And then
if you do get the mortgage, then the interest that
you pay to the bank is the dead money. So
that's maybe a trade off that she's thought about and
we don't know. But it could be a situation where,
you know, you're living, you're renting somewhere that you want
for your lifestyle now and that maybe she can, you know,
when she does buy, maybe she'll be living a bit
further out or in something that's smaller than she's got

(14:16):
now because, you know, you've got the kids now. But
in the future you might be able to buy a
smaller property. You know, maybe that's something that she's she's
thinking about. So, yeah, I guess all of this is
sort of highly, highly personal to your own circumstances. But Sarah,
thank you so much for sending in your budgets. I've
loved seeing the evolution and I'm glad to hear that

(14:36):
we have helped a little bit. That's a it's a
lovely note to to leave things on really with this
series that we've done. Dom That's that's what I hoped
would happen.

S2 (14:45):
Absolutely. You know it's it's it's real It's a real
world impact. Yes. So thanks to everyone for tuning in
over the last six weeks listening to us dissect some
real life budgets. I hope you did take something away
from it. I hope you got something worthwhile, something you
can take home and apply it to your financials. It's
been really enjoyable to do and it's been so much

(15:06):
fun to hear from everyone sending in their questions and
their spreadsheets.

S1 (15:12):
And I think, you know, the more we can be
transparent and talk about our money, the better off that
situation that puts everyone in. And if you're bereft of
someone to send your budget to, you can share it
with a friend. Like I think having this conversation with
friends and family can be just as much fun too.
But I've certainly enjoyed having a squiz at everyone's numbers
And yeah, thanks so much for listening.

S2 (15:33):
We'll be back with our next series shortly. But until then,
be well and keep on saving those dollars.

S1 (15:40):
Because it all adds up though.

S2 (15:41):
It does all that up. Just.

S1 (15:46):
This episode of It All Adds Up was produced by
Chai Wong. The information discussed is general in nature and
does not take into account your personal financial situation, goals
or objectives. You should always do your own research or
get professional advice before making any major financial decisions. If
you like today's episode hit follow in your podcast app,

(16:07):
leave a review and recommend it to all your friends.
You can submit your listener questions in text or audio
format at it all adds up at Nine.com.au you.