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The Dreaded Budget…Risk vs Reward and the Fantastic Plastic

It’s not easy to live on one income. Lucky for us, the internet is full of enticing posts, offering tips to help you pay off your debt in one year and giving us happy examples of people who have achieved their debt-free dream.

Like you, I’ve scoured dozens of these blogs. I want to pay off some of our mortgage and have enough money to stay at home that little bit longer with my children. I want some financial freedom. Don’t we all?!

#1: Groceries

Some budgeting recommendations I came across suggested saving money through cutting my grocery bill. Clearly we are all assumed to be over-eaters and/or spontaneous gourmet chefs, as the main advice here is to plan meals and buy cheaper brands and products. Put back the blue cheese and caviar, people! This doesn’t help me, as we already meal plan and have cut our shopping list down to the bone.

Of course, for our North American friends, the coupon cutting craze seems to help. Families claim to cut their shopping by 50% just by cutting coupons. Not being from the US of A I’m not entirely sure how it all works, but I’m getting pretty jealous about it.

I do have a friend who scours the mailers for her three local stores to see where she can get each item on her list at the best price. She then visits all three stores to complete her weekly shop. I haven’t tried this yet, as it is quite time consuming, but I am determined to give it a go. I’ll let you know how it goes.

#2: Risk and Reward

There are some tips that make me pretty cautious. I once read a book about paying off your mortgage in five years. One of the author’s tips was to cancel your insurance – not everything [although for a moment I actually froze in horror], but your house contents. They also recommended dropping to Third Party insurance on your car. I couldn’t bring myself to do this.

An insurance person once explained that house insurance covers the items that wouldn’t fall out of place if you tipped your house upside down and shook it. Everything that moves is covered by contents. Picture it. That is a lot of stuff to lose in a fire. Or a burglary. Yes, I’m obviously an insurance company’s dream client: paranoid, play-it-safe and pessimistic.

However, it is a concept of risk and reward: you can take the risk and save hundreds of dollars a year. You have to think pretty carefully about it. Would you manage if you couldn’t replace everything that was lost? You decide the risk and the reward and it’s definitely a personal choice.

#3: Cut out luxuries!

Other tips made my eyes roll: make packed lunches instead of buying! Dye your own hair! Go without your weekly manicure! These tips must be helping someone, but I’ve been on a low income for a few years and I haven’t had a manicure in ten years. Lucky I’m not really into the girly stuff, right?

#4: Get real. Get rid of the plastic cards

For us, it’s mostly the little things that add up. Transfer a bit more money for x, another $10 for y. Our biggest success in dealing with this creeping encroachment on our budget has been to use cash only. If there’s no cash in the wallet, we can’t buy it.

Yet I haven’t read this anywhere. Perhaps it’s because I’m looking for something else; a quicker answer. I’ve seen lots of budgeting spreadsheets, snowball debt calculators and tips on making homemade gifts, but no one seems to focus on the big problem: the cards. Debit or credit, it’s an enticing trap of plastic fantastic-ness. After all, it doesn’t matter how many coupons you use to save on your groceries if you then see something gorgeous and unnecessary on sale and think, hmm, oh, go on then.

I’ll be honest: I once spent $20 we couldn’t afford in the dollar store on storage items I’d managed fine without. I knew the money was sitting on the debt card. This had a snowball effect, as two days later I had to transfer more money to top up the milk and bread. And so it goes on. It’s not like that was the only time, much to my shame!

What we needed was a mental shift. The mortgage isn’t a loan to ignore. In fact, if that were an overdraft I’d be busting a gut to pay it off. So that’s how I now look at it: it isn’t a mortgage – it’s an overdraft. A loan. A debt.

The plastic is NOT fantastic – it’s misleading and keeps you in denial. That $20 isn’t ‘sitting’ on the debit card; it’s for food top ups, gas top ups, and other actual necessities.

Cash is visible and tangible. If you can see that you only have $6 left, you’re not going to buy a $4 coffee when you’re on your way home – where you have coffee that has already been paid for.

But…be prepared to eat humble pie

We allocated a ‘spending’ amount of cash for the week and divided it between us. At the first weekend, I was all out and my partner had most of his left. It was so embarrassing, as it’s always me bleating on about keeping to a budget and spending less. Oh, how the mighty have fallen!

So our journey goes on, with a mixture of successes and failures. We are making progress and the trick, I suppose, is to keep going and to try to stay on the wagon.

Which is something else the budget advisers rarely mention…the tedium of living on a budget!

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