Time to reassess your financial priorities?

Written on the 6 May 2020 by Arrow

At a time of uncertainty about the economy, not to mention unexpected social isolation, people are rethinking their personal and financial priorities.

Whether you are spending less by necessity or because you are living more simply at home, this could be a good time to reassess your spending and review your household budget.

Our spending habits have changed
Even though we are spending less in lockdown overall, we have also changed what we spend our money on. We are spending more on groceries, food delivery, streaming services, alcohol, pet care and (home) office supplies. But a lot less on gyms, travel, cafes and restaurants.i

What's more, many of us are discovering we can happily do without many of the treats we used to think were essential. So, if we can avoid slipping back into our old spending habits, we could be in a much better financial position when the pandemic has passed.

By doing some legwork to find the best deals on offer, it may be possible to reduce your outgoings on essentials such as utilities, groceries, petrol, general insurance and housing. However, the big savings usually come from eliminating or at least limiting non-essential goods and services.

Eating and drinking
One spending behaviour that has shifted significantly during lockdown is dining out. A 2019 survey revealed Australians spent $2,704 a year on dining out, on average, and $1,612 on alcohol.ii We are now cooking at home a lot more and we seem to be enjoying it, with households now baking their own bread and embracing the slow cooker.

Once we are able to go back to eating out and visiting pubs and bars we can fatten our wallets by reducing the number of times we eat out, inviting friends over for a coffee, beer or meal rather than meeting them at a café, pub or restaurant.

When it comes to cooking at home, where you purchase your food can have a big impact on your grocery bill. CHOICE found shopping at Aldi can be up to 50 per cent cheaper than other supermarkets.iii

We are also tending to do a larger shop less frequently. Meal planning and doing a shopping list is one way of avoiding the spontaneous purchases that lead to food wastage. Given that the average Australian household throws away $3,500 worth of food each year these are worthwhile changes that will help our hip pockets on an ongoing basis. iv

Exercise
Another big shift that has come from the lockdowns has been in the way we exercise. When the walls closed in, we took to our bike paths and parks and went for a walk or run.

So maybe it's worth rethinking the expensive gym membership and keeping up our Corona exercise plans - particularly if you're one of the 1.5 million Australians who have a gym membership but rarely use it.v

Travel
Prior to the crisis, heading off on holiday usually meant jumping on a plane. Back in 2018, 6.3 million Australians were holidaying overseas and spending an average of $4,750 per person - or $19,000 for a family of four.vi Of course, it's unlikely you'll be engaging in any international travel for a while. But after borders reopen, you may wish to holiday in Australia anyway.

Not only is holidaying locally likely to be less expensive, but it could also mean your dollars flow into one of the tourism-dependent regions which have been so badly hit by last summer's bushfires and now the Coronavirus shutdown.

Thinking to the future
During difficult times such as these, a sound budget based on your financial priorities will help you continue to work towards your long-term goals.

Depending on your financial situation you may even wish to go against the trend and look for ways to get your money working for you. This could include making personal contributions to your superannuation after the recent market falls, or investing outside super, to capture the upswing when the market bounces back, as it always does.

If you would like to set some new financial priorities and discuss your situation, give us a call.

i https://www.smh.com.au/business/the-economy/stimulus-payments-arrest-spending-slump-real-time-data-shows-20200408-p54ida.html/

ii https://thenewdaily.com.au/finance/consumer/2019/09/23/food-spend-australia-budget/

iii https://www.choice.com.au/shopping/everyday-shopping/supermarkets/articles/cheapest-groceries-australia

iv https://www.samedayrubbishremoval.com.au/War-On-Waste-Statistics.php

v https://www.news.com.au/finance/money/costs/lazy-aussies-wasting-18-billion-on-unused-gym-memberships/news-story/6243cf35a8424a8dfa212ea17c1a0208

vi https://www.budgetdirect.com.au/travel-insurance/research/average-holiday-cost-statistics-2019.html