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Budgeting

How to Use the Envelope Budgeting Method

Posted on August 26, 2019

Budgeting Envelopes are a great tool to help you stick to your budget

The Envelope Budgeting Method is a great tool to help you with your Zero Based Budget to stay within your budget. It’s an easy method to track your spending in by category and to keep you informed of when you’ve spent your budgeted amount for a particular expense. If you are struggling to stick to your budget and finding trying to budget blind isn’t working for you, the Envelope Budgeting Method is a great way to give you some control and a birds eye view of your budget expenditure.

Cash Budgeting Envelopes

Generally the Envelope Budgeting Method uses cash that is divided up and placed into separate envelopes with an expense tracker on front of the envelope to tally up your spending as you go. Each time you spend money you would take the cash out of the envelope for the appropriate category, for example, if you were buying groceries you would take cash out of the grocery envelope, you would then note the following on the front of your Grocery Envelope:

Date
Store
Description and
Amount

You would then calculate what budget you had left over, by subtracting your total budget for the month from what you just spent and entering that amount in the Balance column. You would place your receipt inside the envelope.

I would avoid using cash envelopes to hold large amounts of money i.e. If you are using cash envelopes to save up for your annual Insurance or Car Expenses which might involve leaving hundreds of dollars around the house. For these, I would use a completely separate account for your Sinking Funds where you can put away for larger, ongoing expenses.

Digital Budgeting Envelopes

I have hacked the Envelope Budgeting Method which usually involves a cash envelope system after giving it a go for a handful of months and created a Digital Budgeting Envelopes which I found suited me more. It is essentially the same concept except it eliminates the need to carry around lots of cash and physical envelopes in your bag. It also eliminates the issue with couples not having access to the envelope when the other partner has it.

To use the Digital Budgeting Envelope you can track your expenditure in the digital envelope file via your Google sheets which you can access from your phone at any time and share with your partner so you can both access and update the same file in real-time.

Again, if you spend money here you would note the Date, Store, Description and the Amount but this time the final balance will calculate for you in the Balance Column.

The Digital Budgeting Envelopes also don’t require you to physically set up the envelopes every month, you simply duplicate the worksheet and just change the month.

Setting up your Envelopes

Cash Envelopes: If you are using the Envelope Budgeting Method with Cash Envelopes you can simply withdraw your cash from your bank account and put the cash into the envelope. Fill in the Category, Month, and Budgeted amount, print off your Envelopes and glue them onto your envelope (110x220mm).

Digital Envelopes: The best way to track your digital envelopes is to set up an account that will be used exclusively for your envelopes budget. For example, if you have 5 envelopes that you want to track and that total budget is $1000 for the month you would transfer $1000 each month to an account exclusively for your envelopes. If your envelopes start on the 1st of the month on the 1st you would deposit your $1000 amount and ideally have at least $1 remaining by the 30th or 31st to show that you are in budget.

What to do with Unspent Budgeted Amounts?

At the end of the month with the Envelope Budgeting Method for both the Cash & Digital Envelopes, the final balance of each Budget Category will be totaled so you can see what is left.

For example, if your monthly grocery budget is $400 and you’ve only spent $360 this month, you could either transfer the $40 to your savings or use it to pay off debt if you have debt, or you can carry that amount across to your next months envelope. So with the cash envelopes you would move the physical $40 into your new envelope for the next month and with your digital envelopes you could just add in a line at the top of your grocery list and just adding carry over from prior month and then adding a -40 and that will add to your total budget so the following month you would actually have $440.

With the cash envelope you would deposit your $40 into your account and move it to your savings or pay it onto Debt. Or you could add the $40 cash into your next month’s envelope, it is totally up to you. If you want to take advantage of being under budget, by all means, put it to good use and save it or put it towards paying off your debt!

With the digital envelope you would simply transfer the money from your envelope bank account to your savings or pay it onto your debt. Alternatively, leave the cash in the account which would carry over to the following months envelope.

Don’t forget to note the movement on your envelopes if you carry the cash over from prior month by adding a $40 into your prior month to show that money is allocated and adding a -$40 into the new months envelope to show that amount has been added to your new months budget for that category. So in this example the following month you would actually have $440 for your groceries budget category.

What if I am Over Budget in a Category?

It’s important to avoid borrowing money from the following month’s envelopes if you are over budget, this is a slippery slope and will become a bad habit you might never catch up with. Instead, borrow within the same month from other categories. In the above example, if you had $40 leftover in your Grocery fund and you wanted to buy some take out later in the month but had used all all your take out budget, you could carry that amount across to your Entertainment Budget. To do so you would add in a line in the Grocery Category: e.g. “Transfer to Entertainment” $40 and in the Entertainment envelope you would add in “Transfer from Groceries” -$40. Make sure to take the money out you enter the amount as a positive and to add it into the other category you pick it up as a negative! Double-check your balance to the right of the entry to make sure you picked up the transfer correctly!

Categories of Budgeting Envelopes

Budgeting envelopes are mainly designed to help you to control your spending in problem spending categories, those categories that aren’t always so easy to stay in budget. For example, you’re probably not going to go nuts buying excess petrol and your electricity bill might increase of decrease with the change of seasons but isn’t really going to blow out in a spending spree. But your clothing budget might and you might easily spend $800 on your groceries instead of the $400 you budgeted, so with the budget envelopes, we want to focus on the more fluctuating expense categories.

The idea is not to have 30 separate envelopes which will be too tedious and for little benefit, the goal is to stick to the main problem spending areas in your budget.

These might be:

Groceries
Miscellaneous Spending
Home Repairs
Concerts
Entertainment
Clothing
Kids Expenses
Alcohol
Beauty

or any other categories relevant to your budget.

Filling in Your Budgeting Envelopes

It does take some getting used to and get into a habit of writing down what you spent as you go and it can sometimes be a nuisance writing down what you’ve spent when you’re trying to battle kids and a grocery trolley through the car park, but there are ways to make the budgeting envelopes work for you. We want to make budgeting work around you, not be onerous and too difficult to maintain!

I came up with a slightly more flexible system that worked for myself with the envelopes. As I spent money, I would stick the receipt in my bag as I exited the grocery store or left the drive-through and then once I got home and unpacked everything, or had a moment spare, I’d then go and grab my receipt and fill in my envelope and record the expenditure.

Another method for people that don’t want to just fill in their envelopes 24/7 is to fill out your envelopes in smaller chunks. To do this I have a small plastic wallet in my handbag where I collate all receipts and once or twice a week I will go through those receipts and add them into my digital budget envelope or cash envelope. I will tick the top of the receipt on any that I have picked up and will also scan the receipt and save it in my Google Drive if it’s a receipt I want to keep a digital record of. Otherwise once I have picked up a receipt if it is for something I don’t need to keep I will just shred or recycle it once I have recorded the expense.

I do recommend when you first start your budgeting envelopes that you do fill them in frequently as you go, rather than chunk as you will be getting to know your budget and your budget limits and it will take a few months to get used to that and if you don’t update them as you spend you might find that you do go over budget, so until you feel confident of your budget, do update your envelopes as you go. Of course, if updating it as you go is your preference then just stick with that.

Storing your Envelopes & Receipts

With the digital budgeting envelopes I would suggest you keep one file for each year. Start a new one at the start of a new year, so you can choose whether you start that in January or July whether you want calendar or financial year. Set up your Google Drive folders or equivalent by expense category e.g. Clothing, Home Repairs, Warranty and so on so you can easily find your scanned receipts when you need them.

With your cash envelopes they will build up over time so I would suggest once every three months you take a photo of the front of any older envelopes for reference and recycle them. Then scan what receipts you wan to keep copies of, e.g. for returns, warranties, or for insurance purposes and shred or recycle the other ones you don’t need to keep like groceries, beauty expenses, etc.

And there you have it how to use envelopes for your budget. And to get you started I have a Cash Budgeting Envelope Printable and a Digital Budgeting Envelope in my store which you can check out. These come with detailed instructions for how to set up your cash or digital envelopes.

Do You Want to Learn How to Spend Your Money With Intention?

If you want to take control of your financial future, stop stressing about money and learn how to spend your money with intention, book in for your free Q&A call to see how Minimise With Me Financial Coaching can help you gain clarity around your finances!

You can learn more about Minimise With Me Financial Coaching services here.

This week’s comment question: Have you ever used budgeting envelopes? Did you find they helped you to stay on budget? Let me know in the comments below!

Budgeting

How to Create a Monthly Zero Based Budget

Posted on August 21, 2019

Are you sick of living week to week? Get on top of your finances now by creating a Zero Based Budget

A budget is a bridge between you and financial freedom. If you have no plans in place for where your money goes, it’s going to be gone just as fast as it came in. We all work hard for our money so why not take a little bit of effort to make sure all our hard work is not going to waste.

When you Create A Monthly Zero Based Budget you can spend guilt-free on what things matter to you. It doesn’t have to be this noose around your neck demanding you enjoy nothing and miss out on everything you want. If anything, a budget is the complete opposite of that. As Rachel Cruze says it ‘gives you permission to spend’, you don’t have to feel guilty about buying that coffee every morning when you know that your bills will be paid and that your savings have already been transferred across.

Bonus: I’ve included a link to grab your own Zero-Based Budget worksheet at the end of this post to help get you started on creating your own budget.

Rule of Thumbs

Budget Percentages Guidelines
A good rule of thumb for budgeting often shared is to Save 20%, Spend 50% and Enjoy 30%. If you have Consumer Debt you would replace the 20% Savings with 20% to Debt Repayment. However, guides and rules of thumb, are just that – a guide. Your budget should reflect your values and be completely unique to you. No two budgets will look the same!

Emergency Fund
It’s important to have an Emergency Fund which will help you create a buffer between your budget and unexpected expenses like a Dental Bill or a flat tyre. An Emergency Fund should be a minimum of $2,000, that is – enough to weather you through most storms! But of course, the sooner you can build your Emergency Fund up to 3 months of expenses, the better!

Before we start on the ‘How’ of budgeting, let’s get onto the ‘Why’ of budgeting.

Know Your Why

Before you even start your zero-based budget, you should know your ‘Why‘, that is why you want to change your finances. This is particularly important if you are trying to sell the idea to your partner. Demanding you cut all expenditure and sell everything not bolted down isn’t going to be the greatest proposal out of nowhere.

First, you must ask why do you want to work on your finances? Is it cos you work too hard to live week to week? Are you saving up for a huge goal like buying your first home or paying off your student debts? Maybe you are earning good money and spending even better money and you want to get a handle on where your money is going? Write it down somewhere and put it somewhere you can easily see it, such as your fridge.

Some of your why might be:

To pay for our children’s future education
To go on a trip to Disneyland
To be mortgage-free so you can afford to work less
To reduce stress and arguing around money with your partner
To live a more intentional life

Once you know your motivation it’s time to start on your budget.

How to Create a Monthly Zero Based Budget

1. Put all your money on the table

Grab all payslips or anything else you need to work out what you and your partner (if you have one), earn. If you have a partner but have separate finances, do a separate budget to them. It’s up to you how you want to allocate expenses whether it be a 50/50 split or expenses are based on a percentage of income.

It’s amazing how many people can’t answer the question: what is your monthly after-tax income. We are going to change that today.

List your expected income for the month as we are going to prepare 12 budgets a year, one for each month. The cut-off date is not important, you can start it from today, or the 1st of the month. Whatever you prefer.

Calculating your income

If you are paid monthly you will only need to enter one amount for each person. If you are paid weekly or fortnightly you can put the 2-5 pays you will receive for each person. Include any other pay from second jobs, side hustles etc in their own income line.

If you have differing income payment periods that is not a problem. If you get paid $800 every Wednesday and there are four Wednesdays this month your total income for that income stream for the month would be $800 x 4 = $3200. If you have a second household salary that is paid monthly of $5000 you would add that on a separate income line to make a total income for that month would be $8200.

The following month there might be 5 Wednesdays so that month you would enter into your budget 5 x $800 = $4000 for the weekly pay plus the monthly salary of $5000 so your total income would be $9000.

Don’t forget to add in any other income that month such as bonuses, pay raises, tax refunds etc.

Budgeting for Irregular Income

If you have irregular income, so your income fluctuates, start off with the minimum you expect to earn. Base this on an average from your last three months’ pay. You might need to do some digging to get these figures.

Simply add up your total pay of the last three months and divide it by 3 and use this as your budgeting income figure. For an even more accurate minimum estimate go back six months and again, add up all income from that job and divide by 6. Total the income for the month, this is what you have to work with. This income estimate of course, will need to be reviewed regularly.

You’ll then need to base your Zero-based budget off this minimum income figure with anything extra being a bonus that you can choose to add to your Emergency Fund, add to your debt snowball to pay down debt, save it or spend it.

2. Identify your essential expenses.

It is important to prioritise your most important expenses in your zero-based budget. This ensures that you don’t go on a clothes shopping spree and leave yourself short to cover your electricity bill or groceries. You can live without a new outfit, you can’t live without food or electricity and it’s not fun not having the basics for a quality living standard. Estimate your monthly essential expenses, these might be:

Groceries
Electricity and gas
Water
Health insurance
Mortgage or rent
Medical prescriptions
Child care
House insurance
Petrol
Car Expenses
Mobile
Internet

These expenses need to come before all discretionary or debt repayments. If you can’t put fuel in the car or pay the child care bill so you can go to work you’re not going to be able to earn your income to pay any debts which is why these need to come first.

3. Set up your Sinking funds

Sinking Funds allow us to prepare ahead for things we know we need to save for in advance. Rather than waiting for November to start thinking about budgeting for Christmas, we can start allowing an amount in our budget to split the cost over 12 months. ‘The same goes for car expenses, your insurance and registration bills come every year so you need to plan ahead for them rather than stressing when the bill comes and you only have 6 weeks to find $1200!

List any items that you need to plan ahead for in your budget here. For example, if you take an annual holiday estimate your budget and put 1/12th each month away.

Some sinking fund examples are:

Christmas
Gifts
Medical/Dental
Holidays
Home Repairs & Maintenance
Car Maintenance
Home Renos
Clothing
Beauty
Miscellaneous expenses

Estimate the monthly cost of each Sinking Fund and list these in your budget. You might need to do a bit of math in order to make an accurate estimation. E.g. add up how many gifts you need to buy at Christmas and how much you will spend on each. Check out my Christmas Gift List Printable to get you started. And go through your car expense receipts from the prior year to estimate how much your insurance and registration will be and add in a buffer services and any unexpected repairs that are required.

A great way to track your Sinking Funds is to set them up in a separate bank account and track them with the Sinking Funds Printable or Worksheet where you can update each month how much you have put away and spent on each Sinking Fund Category and know if you are under or over budget in that category.

4. Debt and repayments

The next thing you need for your zero-based budget is to add in your debt repayments.

It is important not to think of debt as just the minimum repayment. Just because your credit card lets you pay only 2% on your debt balance doesn’t mean that you should. With that outlook, you can view debts as smaller than they are and disregard the impact the true debt has on your budget. Often people spend themselves into more debt, justified by them being able to afford the minimum repayments only to realise thousands of dollars later the financial hole you’ve dug yourself into.

The Debt Snowball Method
List all your debts excluding your mortgage from smallest to largest in a worksheet like the Debt Snowball Calculator and note the interest rate and minimum repayments. Use a debt repayment strategy such as the Debt Snowball Method to pay them down as quickly as you can. This is where you pay the minimums on all debt but the little one which you throw any spare dollars at.

Go back to your budget and mark in the total minimum monthly repayments for all debts. Then add in an additional amount for extra debt repayment. You should aim for 15-20% of your total income going to debt repayments (for all consumer debt excluding the mortgage).

Of course, if you find that your Sinking Funds and Essential Expenses are consuming all your income and you have nothing extra to throw into your Debt Snowball, this will mean you need to either cut back on expenditure or increase your income.

5. Non-essential expenses

Next, we will list the lifestyle, non-essential expenses. The things that we could live without temporarily when faced with a crisis like a job loss.

In this area we include:

Personal Spending
Subscriptions
Sports/Lessons
Entertainment
Beauty
Hobbies

Estimate the monthly cost of each and list in your budget.

6. Saving and investing

If you are not paying off consumer debt with the Debt Snowball (just one debt repayment method) you should be aiming to save or invest at least 10% of your pay cheque. If you can shoot for 20% even better! Pay yourself first!

If you can’t that’s something you can aim for and work towards in time, but at least mark in something for savings even if it is only $20 a week. A big part of savings is making the habit, set up your savings as an automatic transfer to come out of your pay before you even have a chance to spend it.

Balancing Your Budget

The goal with a Zero Based Budget is to ensure that every dollar is allocated to an expense or saving amount with the balance of total income less total expenses being $0. If your budget balance has gone into negative you will need to consider what you can cut from the above categories starting with the Non-Essential Expenditure. And if it is positive you can add more to Debt Repayments or Savings & Investing!

If you are short here is the time to think outside the box in order to balance the budget. Of course, it is always a good idea to find ways to save money and make more income!

Some ideas to help you balance your budget could be:

– Sell your car and pay out the loan and buy a cheaper car with cash freeing up one debt repayment

– Start Meal Planning to save in your grocery budget

– Cut your electricity bill by being more mindful of turning off power points and only using the heater and air-con on extra cold/hot days

– Pick up a side hustle to increase your income temporarily to kick start your Debt Repayment

– Bring your lunch to work and save going out with colleagues for once a week

– Ask your kids to pick one extra-curricular activity at a time until things are financially a bit less tight

– Renegotiate your interest rate on your mortgage and other debt to get interest savings

Tracking your Budget Vs Actuals

Of course, there is no point budgeting if you are going to not track it at all to make sure you stayed under budget. Make sure that you keep track of your Actual vs Budgeted expenditure each month. A great way to do this is with a PDF Printable Expense Tracker or Expense Tracker Worksheet.

Simply take note of where your money is being spent as you go and add it into your Expense Tracker. Note the Date, Store, Description of what was purchased, enter a Category and the Amount.

Add up how much you spent in each category and note it in your Zero-Based Budget worksheet ‘Actual’ column and your budget will calculate if you were under or over budget in each category and by how much.

To help you get started, click the link below to grab your free Zero-Based Budget Worksheet, so you can get started spending your money with more intention today!

grab your free zero-based budget worksheet

This weeks comment Question: What did you cut from your budget that didn’t seem so bad once you’d made the cut? Let me know in the comments! 🙂

Budgeting

15 Tips to Reduce Food Waste and Save Money

Posted on May 28, 2019

When I first moved out of home, I thought I had everything worked out. I could vacuum by age twelve and washed my own clothes by fourteen. And thanks to that, but the time I moved out, into my very first home at 24 but I was adulting reasonably well.

Notwithstanding that, after a few years of living out of home in my mid twentys, it became pretty evident that my husband and I were binning an unbelievable amount of food (and money!) every week.

Every Sunday, our bin collection day, came the ritual. I would open up our fridge and proceed to empty it of anything that had gone out of date or that had gone bad. Some days I would have 2-3 bags of food waste. It was all being composted by our local council, but that really wasn’t the point!

We were wasting time shopping for items we didn’t need.

My Sunday was being eaten up clearing out said fridge of our excess food, time that of course, could be better spent doing anything but clearing out our fridge accumulations. We were wasted money on food we weren’t eating and were literally throwing our money down the drain. And most importantly we were being environmentally wasteful. Perfectly good food was going in the bin because we were too time poor to cook it and often ended up just grabbing KFC on the way home instead.

Once the realisation of the level of all round waste sunk in, and the acknowledgement of the invisible money we had been throwing straight into our bin, I became extremely interested in researching the correct way to store and prolong the life of food.

Over the next couple of years I picked up heaps of tips and tricks that have helped us to Reduce Food Waste and Save Money that I am going to share with you below in the hope that it too, will help you. This list is not exhaustive, and there are many more for the different foods you consume in your household, but these are the ones that have helped me the most.

Let’s get to it, here are 15 Tips to Reduce Food Waste and Save Money

15 Tips to Reduce Food Waste and Save Money

Shop ‘Just In Time’

Start Meal Plannning and reduce food waste and save money all at the same time without much effort! Check your calendar and shop for the meals you plan to eat at home, so you don’t end up buying more than you need. When you are more intentional with your grocery shop, not only can you reduce what ends up in your waste bin, but there are huge dollar savings to be had. Check out My Beginner’s Guide to Meal Planning here for more tips on how to shop intentionally for groceries.

nd something that isn’t touched on much, there is an awesome satisfaction to having just enough and using up what you do have. Give it a go and let me know if you found the same! 🙂

Capsicum

Throw your capsicum in a plastic bag when you get home to make them last a good 2-3 weeks. Normally if you leave them out in the open they will start to spoil around the 5-7 day mark. Alternatively slice them up and freeze them to use on a home-made pizza or stir fry.

Basil

I like to buy Basil plants from the local supermarket and throw them in a glass and water them each day, leaving it on my kitchen windowsill where they can get some sunlight. This usually extends the life to 2-3 weeks rather than the ones in packaging which seems to die a couple of days after they enter your fridge.

Before this I was spending $3 or more a week on basil, which seemed to always go bad when I needed it for a meal. I now can get away with spending $3 once every three weeks or as I need it.

Of course if you have a green thumb, please do grow your own, but I have tried and failed at growing it outside, but if you can you are amazing! :))

Fresh Herbs

Reduce food waste and save money by wrapping your herbs in dry paper towel, just a thin layer underneath and on top and store your herbs in a container. We’ve done this with Coriander and it helps extend the life to at least 7 days Vs just leaving the Coriander in a container and watching it wilt in a matter of days.

Alternatively you can freeze your herbs in ice cube containers with oil to use when cooking.

Chillies

We used to buy and bin red chillies too frequently. It was a ridiculous waste of food and money so I learnt from our extremely knowledgeable Mother In Law that you can easily freeze Chillies. Simply throw them into your freezer in the container or bag they come in and they’ll keep for months! When you are ready to use them, simply grab them out of the freezer and slice and they will defrost in your pan.

Spinach/Rocket leaves

Another food managed to reduce food waste and save money with was spinach/rocket salad leafs. We often ended up buying more than we needed and wasting the excess until we figured out there was an easy and less wasteful way to extend the life of your Spinach or Rocket.

Like with the Herbs, mentioned earlier, if you store your Spinach or Rocket in an airtight container lined with paper towel on the top of bottom, this will draw out any moisture from the leaves, keeping them fresher for longer. This can give you extra time to enjoy your salad and save you on those costly salad bags!

Want to Save More Money? Check out the 52 Week Savings Challenge

Carrots

This is a super new tip I learnt to reduce food waste and save money and another easy one. I cannot tell you how many times we grabbed a kilo bag of Carrots from Aldi (as they only sell them in bulk) when we only needed 3 or 4 carrots for a soup. We’d soon forget about said Carrots and before we knew it they were bad and needed to be binned.

If this has been you up to this point, here’s an easy tip to reduce food waste and save money with your carrots..

Put all of your carrots into a large cup filled with water in the fridge. And just change out the water every 2-3 days to keep them fresh. This will make them last around 2-3 weeks! And of course you can always dice them and freeze any excess, or slice them and have them as a snack with your favourite dip!

Bread

This is a pretty obvious one but one that can’t be forgotten. Freeze all your bread products! It’s just my husband and I so we don’t get through even a loaf a week but always like to have bread handy, so we got into the habit a long time ago of freezing everything: Crumpets, English Muffins, Bread, Wraps, Pizza Bases – you name it!

It doesn’t work so ideal for things you want to eat fresh, but for anything you plan to toast or put in the oven – it works a charm! Simply chuck in the microwave for 30-40 seconds and then toast away! And a great thing to utilise if you want to stock up on bread when it’s on sale!

Bananas

Another tip to reduce food waste and save money is to, take your browning bananas and chuck them in your freezer for later use with baking or use them up straightaway to make your favourite Banana baked treats! My fave being banana bread. You can also use them for making Banana Ice Cream or keep them for smoothies or milkshakes!

And if you want to enjoy them for longer, simply wrap the tops of the stems firmly with cling wrap or slow down the ripening process by storing them in the fridge until the day you are ready to eat them!

Onions

Have you ever chopped half an onion and not known what to do with the rest? Me too! An easy tip to reduce food waste and save money is to slice any left over onions and freeze them in a resealable sandwich bag. They won’t be ideal for using them fresh, but are great to throw in a curry, stir fry or on a pizza.

Spring Onions & Leeks

I often find that I always have more spring onion than I need for my meal. Reduce waste and save money by chopping the base of the spring onion leaving about 10cm and drop the roots into a glass of water. Over the next 7 or so days you’ll have a new bunch of spring onions sprout. And surely a fun experiment for the kids!

This also works for Leaks but so far it has been less successful! I have found that around this point the base gets a bit too moist, so after this I throw it into our compost bin. But you should get two for the price of one this way 😉

With the spring onions, slice them up and freeze what you don’t need to use immediately in a zip lock back. Simply shake out the contents into your soup or stir fry when you need them and squeeze out the air in your bag when returning them to the freezer.

Tomato Paste

If your recipe calls for 3 tablespoons of tomato paste don’t feel you need to just throw it back in the fridge, ending up with that gross mould that seems to find it’s way into the jar before you bin the jar. Divvy what’s left into an ice cube tray and store in a sandwich bag when they are frozen blocks. Pop out however many you need when you are cooking.

If you do plan to use your remaining paste in the next week or so, store the jar upside down to stop that mildew from forming inside the jar. (Just be careful not to leave if for too long as ours exploded and we had sauce everywhere ‘;))

Eggs

If your eggs are out of date, reduce food waste and save money by testing your eggs before you throw them out. Wonder How To: Food Hacks suggests you fill a bowl with cold water and put the eggs inside. If they sink to the bottom they are fresh, if they float they are past their prime so go ahead and bin those. Rather than just binning ours the day they go over the use by date, we now do a quick check on them!

Berries & Grapes

Another way to reduce food waste and save money is to freeze your Berries and Grapes. Taste.com recommends layering them on an oven tray to freeze and then storing them in airtight containers. The Grapes make a great frozen, healthy snack and the berries can be added to fruit smoothies!

Celery

If you can’t quite eat a whole bunch of celery in the time it takes to go bad, try this tip from Clean My Space to reduce food waste and save money. Wrap your celery tightly in foil to keep it fresh for up to two weeks! I’ve just tested this and happy to say it certainly works! Alternatively you can dice it up and freeze it ready to use in your next batch of soup! With celery at $3-4 a bunch it’s a great way to save!

And there you have it guys, 15 Tips to Reduce Food Waste and Save Money!

This Week’s Comment Question: What do you do at home to prolong the life of you food and save money on groceries? Let me know in the comments below!

For more helpful tips to reduce food waste and save money check out:
10 Easy Tips To Save Money On your Groceries Budget and 6 Tips to Drastically Cut Your Grocery Bill!

[Photo by: Elena Koycheva @ unsplash.com]

If you found value in this post I would be super appreciative if you could share it with others who might also find value in it 🙂

Budgeting

Ten of the Best Money Advice I’ve Ever Received

Posted on April 28, 2019

Looking for the best money advice around? Check out these 10 money tips!

Over the past few years I have been on a financial knowledge binge learning and absorbing as much financial information as I can. I can’t say I was raised with a wealth of financial knowledge passed down to me but I did take in as much as I could from those around me.

A lot of what I observed around me was more not what to do with money than what to do, which can often be just as valuable.

Ten of the Best Money Advice I’ve Ever Received

Some are from friends and family, and others from some financial experts I look up to.

**This post contains affiliate links. If you make a purchase of a product from the links in this post I will receive a small commission, at no cost to you. This allows me to keep my blog advertisement free and support the running costs of my blog. I only recommend products I believe will add value to others and that I love myself.**

Use an offset account for your savings to save on your mortgage – An old friend

When I was about 24 and looking to buy my first home, a friend was kind enough to share some of his financial wisdom with me, which was always welcome! He told me to make sure when I got a mortgage I utilised an offset account so I could reduce the interest paid on my mortgage with my wage and any other cash I had. You can read more about how to do this here.

It was one of the best money advice I’d ever received when I was hitting my adulting years and something that has saved me potentially tens of thousands in mortgage interests!

Pay yourself first – The Richest Man in Babylon, George S Clayson

I can’t remember who recommended I read The Richest Man in Babylon but I found it interesting to see sound financial tips that have stood the test of time, this book being released all the way back in 1926. One of my biggest takes from the book was to pay yourself first! As in set aside savings before you have paid $1 to debt or bills.

If you leave savings as a last priority, it will be your last priority. George S Clayson mentions via parables set in Ancient Babylon the importance of saving 10% of every pay cheque a habit I have kept to this day. And once you get the hang of it, it’ll become second nature.

Save up an Emergency Fund of 3-6 months of expenses – Dave Ramsey.

In Dave Ramsey’s book The Total Money Makeover Ramsey describes the 7 baby steps. This one refers to Baby Step Three, once you are consumer debt free you need to save an Emergency Fund of 3 – 6 months of expenses. When you have 3-6 months of expenses saved you give yourself a financial buffer and breathing room. If you lost your job tomorrow how long could you survive for until you found another job? Giving yourself at least three months allows you to cover yourself for the most unexpected situations like redundancy or illness and also gives you the opportunity to leave a toxic job you hate. Be kind to yourself, take note of the best money advice from Mr Ramsey & give future you options by saving up a minimum of three months of expenses.

Related reading: Dave Ramsey Financial Guidelines to Live By

Only insure things that can financially destroy you: your car, your home and contents, health, your life, Scott Pape – The Barefoot Investor

This is one of those questions that no one seems to know the answer to, so I was thrilled when Scott Pape answered it in a matter of words in his book The Barefoot Investor. Pape suggests that you should only spend money to insure things that can financially destroy you. The phone insurance or extended warranty on that TV don’t make the cut. Spend your hard earned dollars where it counts – private health insurance, permanent disablement and death and income protection insurance.

Don’t put Yourself on Sale – Women and Money by Suze Orman

I recently read Women and Money by Suze Orman where she raises the issue of women being too afraid to ask for what they are worth. Orman says to know your worth and not be afraid to ask for it. Whether it be the raise your deserve from your boss or the price your client should be paying for your skill. Don’t sell yourself short. If you deserve a raise, ask for it and if you don’t get what you feel you should, be willing to go elsewhere.

Pay off your mortgage before you retire – both my Grandmothers

I didn’t have much financially savvy family to sponge ideas from growing up, but both my Grandmother’s paid off their homes before retirement. I remember my Grandmother telling me how hard she worked and made sure every dollar she could put at the mortgage she did. It meant that by their 60s they were mortgage free and didn’t have to worry about a huge expense in retirement. Definitely the best money advice I have gotten from family over the years and one I will certainly keep in the forefront of my mind ;):)

Say no to debt other than a mortgage – The Minimalists

I discovered The Minimalist and their podcast about few years ago now and consumed everything I possibly could of their material. Once recurring piece of advice from Josh & Ryan is to stay out of debt other than your home.

When you are debt free you keep yourself free to make decisions for you. It could be the freedom to move interstate, cut back hours or take a lower paying job that gives you more purpose than your current one does. The best money advice is always to avoid debt, especially bad debt on things that don’t have a return like going into debt for holidays or shopping sprees.

Plan ahead for savings like weddings and a house – I Will Teach You To Be Rich, by Remit Sethi

Remit has a whole chapter in his book I Will Teach You to Be Rich that details how to plan and save ahead for those big ticket items in life like cars, your first home and weddings. He suggests that most people should start saving from their early 20s for a wedding, particularly if you strongly believe you will get married one day. Planning a Debt free wedding is possible and the sooner you start the better! Same goes for your first home. Please take the best money advice Remit has offered, (and take it from someone who only had 19 months to save for a wedding and month long honeymoon in Europe!) Don’t leave these huge financial undertaking for 30 year old you. Time is your friend so get started today.

Millionaire’s don’t always live like Millionaire’s – The Millionaire Next Door, by Thomas J. Stanley and William D. Danko

Reading The Millionaire Next Door was a window into the life of your everyday millionaire. Here you won’t see any mansions, or sports cars or tennis courts. This books shows how you can maintain a comfortable lifestyle without having to spend like you’re the next Kim Kardashian and to manage your wealth sustainably so it outlives you. If anything the millionaire’s interviewed in this books showed a different perspective to what most things millionaire’s are and show that you don’t have to scream ‘I’m Rich’ to the world in order to be wealthy.

Spend some on things you enjoy – Mr Minimise With Me

I was somewhat financially independent at the age of 15. My single mother put a roof over my head and food in the fridge, paid for my medical needs and utility bills but other than that I had to pay my own way. It wasn’t an ideal situation but I made it work and got myself a job as a checkout operator at 15 to cover my own expenses and spending.

As a natural saver, and someone who often though ‘how many hours did I have to work for this’, at a young age I was very reluctant to spend any money on non-essentials no matter how much value something would add to my life.

Despite having more than enough saved up, I was reluctant to spend $500 on a new guitar that I needed for my HSC music exams at the time. My Mum had bought me a beginner guitar two years earlier which I played nearly every day but I still did not see the value in parting with my money. I ended up finally buying a new guitar a few weeks out from the end of year 12 but it was the perfect example of something I should have just bought when I needed it at the beginning of the year rather than depriving myself just because.

It was a valuable lesson and made me realise that not every dollar should be saved. If you struggle with this as well, it’s a good reminder to know that it is okay to spend on yourself occasionally when you can afford to do so. Life isn’t meant to be about endless deprivation. And you can’t enjoy money when it’s just locked away in a bank account indefinitely. Money is a tool to be utilised.

It took a while, but my husband has helped me to see that it is okay to spend money on things that add value to my life. I now value travel and experiences and don’t get so caught up in the savings side of things that I miss out on somethings I want or enjoy 🙂

The best money advice is usually some nugget of wisdom on how to save faster or pay off debt faster but I think advice on how to learn to enjoy your money is also as important and helps sticking to a budget or paying off debt over the long haul more likely to happen if you get some to enjoy too!

[Photo: Sam Truong Dan @ unsplash.com]

This weeks question: What is the best piece of financial advice you’ve ever received? Let me know in the comments below! 🙂

If you found value in this post I would be super appreciative if you could share it with others who might also find value in it 🙂

Budgeting

Dave Ramsey’s Financial Guidelines To Live By

Posted on April 22, 2019

Have you heard Dave Ramsey's Financial Guidelines?

For the past couple of years I have read, listened and devoured everything of Dave Ramsey’s that I could find. I have read the Total Money Make Over, Retire Inspired and The Everyday Millionaire**, which have all helped arm me with extremely valuable financial knowledge that has given me guidelines in order to make intentional financial decisions. I’ve also spent countless hours listening to the Dave Ramsey Show to pick up on those nuggets of wisdom that weren’t in The Total Money Makeover.

If you are keen to know some of Dave Ramsey’s Financial Guidelines to Live By on making intentional money decisions and building wealth read on 🙂

Here are 13 of Dave Ramsey’s Financial Guidelines to live by!

SAVINGS

1. Sell everything you own to save up your $1000 Emergency Fund

To start your path to create wealth, the first of Dave Ramsey’s financial guidelines to live by is to sell everything you own: Some great tongue-in-cheek advice from Dave, but worthy nonetheless. You need to get your Baby Step 1 Emergency fund of $1000 saved up quick smart. In order to do this, Dave suggests you sell everything not bolted down in your home ‘:).

Sell whatever you can: your clothes, electronics, furniture, old collections, appliances, decor – whatever you’ve got to boost your Emergency Fund! You’d be surprised about how much money your clutter can make you. Let’s get it done quick! 🙂

Related reading: How I made $5000 from selling my clutter

2. Save up a 3 – 6 month of expenses Emergency Fund before buying a house

Dave Ramsey’s Financial Guidelines on buying a home always suggests you save up a 3-6 month Emergency Fund before buying a home. As Dave says, if you don’t – Murphy will move right on in. When you have a fully funded emergency fund before buying a home you are well placed to deal with emergencies as they come up. If your car breaks down, you need to replace the water heater or pay your insurance excess after a storm – there is no need to panic, you’ve already got a good buffer between you and Murphy.

By all means it will delay your dreams of home ownership by a few months but when you have that piece of mind, that if anything goes wrong you can ride it out, you’ll be glad you did!

You can read more about the Dave Ramsey Baby Steps Here 🙂

3. Don’t invest your Emergency Fund

Every time I hear about anyone talking about trying to invest their Emergency Fund I cringe! As Dave Ramsey’s Financial Guidelines say, this fund is not to be considered an investment and not there for the purpose of making you cash. It is there purely to give you liquid funds in the event of an emergency, a time when you might need cash immediately. You don’t want to go to use your emergency cash that you invested, only to find that half of it has disappeared.

The best you can do is find a good bank with a decent interest rate on savings. Keep your investing funds completely separate. One day you’ll be glad you did!

CARS/VEHICLES

4. Things with motors should add up to less than half your annual salary

Another amazing piece of advice from Dave Ramsey on vehicles. Dave’s rule is that you should never own more than half your household annual income in things with motors in them – that go down in value. This being cars, motor homes, motor cycles, boats and so on!

If you earn $80k and own a $55k truck you have too much money tied up in depreciating assets. You want your money invested in ways to grow it – not eat it up!

Combined Vehicles

Household income > 50% = TIME TO SELL!

Take an assessment of your current vehicle values and add them together. If the total of your vehicles values over your household income is more than 50% of your income it’s time to sell them!

5. Don’t spend more than your car is worth to repair it

One of the best pieces of advice Dave has given on The Dave Ramsey Show is how to know when to repair or replace a car. Dave says to research the market value of the vehicle and not to spend more on the vehicle in order to get it repaired than it’s market value is. For example; if your car is worth $2000 but needs $3000 of repairs you would just sell it.

This is just a guideline to know where to draw the line in the sand on whether to repair a vehicle or not. If you really love the car and it won’t cost much more than the market value to repair it you might be able to still fix the car and keep it but just be ready to let the car go if it is significantly more.

Of course don’t forget to shop around for repairs and get a second opinion which might save you some serious cash and allow you to keep the car after all!

Related post: How Much is Your Car Really Costing You?

HOME BUYING

6. Only buy a house at 25% of your salary or less

Dave Ramsey constantly refers to how people who win with money are debt free including their home. When you don’t have any payments in the world you can make huge steps to build wealth. This is why Dave recommends only getting a mortgage at a max of 25% of your salary.

When you spend more than 25% of your salary on your housing you are minimising what is left to cover other bills, insurances, spending money to enjoy yourself and your savings ability.

Keep your financial stress low by limiting your housing costs to below 25% of your household income.

7. Buy investment properties in cash

There are always people spruiking get rich quick ideas around real estate and borrowing yourself into oblivion.

Dave’s Real Estate approach takes patience and more time to carry out but it covers you for all market conditions. Dave’s advice on Real Estate is to save up for real estate investments in cash! As Dave says, if the market drops or you can’t find a tenant for 6 months you can weather out the storm. Unlike the investor who decided to buy multiple properties with large mortgages who won’t be smiling so much if the market drops.

DEBT

8. Avoiding Student Loans

Dave often reports these words on the Dave Ramsey Show ‘I’ve never told anyone to go into student debt’. But how do you pay for university without student loans?

Here are some wise suggestions from Dave Ramsey to help you avoid going into student debt:

Start your study at Community College (or TAFE in Australia). These education institutions are a lot more affordable and can give you credits for university study. I saved myself thousands of dollars in student debt by doing my Advanced Diploma in Accounting at TAFE for two years before heading to uni. By the time I got to university I had only 13 of 24 units left to complete of my BA (Accounting) thanks to my advanced standing credits. TAFE at the time I studied was $4000 for the Advanced Diploma vs $800 a subject at university which saved me approximately $6000!
Study locally so you can live at home or save on interstate fees.
Go to a less prestigious university. The bigger the name of your uni, the more you are going to have to pay to attend. Unless your parents have offered you a blank check book (and they can truly afford it) attend more affordable universities.
Save up ahead of time for your student loans. If you have kids you should be saving ahead of time to help them study at university debt free. Investing $10k when your child is born and adding just $100 a month until their 18th birthday could grow to $78,000 thanks to the magic of compound interest (with an average 7% return rate), ready to cover their education costs debt free.
Apply for scholarships to help you pay for some of the cost of university. The more you apply for, the more change you have of qualifying.

If you don’t have any financial help from your parents you can do the following to avoid student loan debt:

Save up as much as you can before you start university.
Considering getting an Internship/Cadetship that will cover your study expenses whilst also training you up in your chosen field.
Whilst you study, get a job or a side hustle to pay your fees as you go or work like a crazy person during your study breaks. Work out how much you need for the next semester and divide that by how many weeks you have to save up to give you an idea of how many hours or shifts you’ll need to take up.
Buy second hand text books and sell the prior semester to help you cover any new ones. At $100 plus a pop this can make for some huge savings!

9. Save up and make a cash settlement offer on old debt.

If you have an old debt sitting around that you haven’t make a payment on since who knows when, save up some cash and make them a cash offer on the remaining balance. Dave Ramsey suggests some you might be able to make a cash offer of 5c on the dollar. But even if they will only take 25% of the balance, you are still making a lot of headway!

Don’t forget as Dave recommends to get the offer in writing stating that this will settle the balance in full and close the account and do not give electronic access to your account to the credit company. Write them a cheque. Some very wise words from, Dave!

10. When it takes longer than 2 years to be consumer debt free

Dave Ramsey suggests that if you will take more than 2 years to pay off your remaining consumer debt that it is time to get selling. You can either hustle like a crazy person or bail yourself out by selling the car/s, boat, investment properties or your home. Do the rough math as Dave does on his show and work out a rough time line for your debt repayment. If it’s much longer than 24 months, for you sanity it’s probably time to get selling!

RAISING KIDS

11. Pay your children for chores as they are completed

Dave recommends paying your children as they compete tasks in order to show them the direct link between work and being compensated rather then waiting for the end of the week.

Make some chores family duties. Don’t pay your kids for every finger they lift. Make some chores mandatory and uncompensated, to be done for the good of the family such as, setting the table, feeding pets, washing up or making their bed.

12. Support your teenagers in making decisions about their education

Dave Ramsey’s Financial Guidelines include preparing your kids for the future. Don’t leave your teenager on their own to make huge life decisions about their future. Help them to work out what they are good at and passionate about and identify potential career paths.

Research salary averages with them based on level of education and time spent in the industry so you can see a direct link between career path and future income. Weigh up what level of education is needed to achieve that chosen career path and map out a plan with them, where they can afford to study, what course they need to get into their chosen field and how the fees will be paid.

Ensure you consider whether it is worth the investment into a uni degree. Don’t allow your teenager to go into $300k to get a Chiropractor degree if they can only earn $60k-70k. Be sure to shop around for reasonable return on your investment.

13. Teach your kids to Give, Save and Spend

As Dave always says: Live like no one so in the future you can live and give like no one. Starting to teach your kids this well before they leave the nest will help you raise “financially well rounded” kids.

You will hear these three scenarios repeat themselves on The Dave Ramsey Show with callers.

Some people are extremely generous with their money, and lend money they don’t even have and find themselves in their own financial pickle.
Others callers are avid savers and feel extreme guilt over spending anything on themselves even once they achieve financial freedom or Millionaire status.
Then there are the spenders who leave not one dollar to be saved and go beyond and find themselves in ballooning consumer debt.

None of these are ideal financial habits and all can lead you into being taken advantage of, not leading a full and happy life and being miserable and swamped with debt. You can teach your children to have a healthy relationship with money and giving, spending and savings and help them learn valuable skills for when they hit adulthood and save them the troubles that come from not having a good balance.

A great way to do this is to encourage them to split their chore money or anything else they earn into 3 jars: Give, Save and Spend.

It’s a great way to teach them to be kind and compassionate for those who are less fortunate, to teach them that not every dollar should be squirreled away – they need to enjoy some and to not whittle away every last penny either.

[Photo: Michael Longmire @ Unsplash.com]

This weeks comment question: Which of Dave Ramsey’s Financial Guidelines have help you be more intentional with your money?

If you found value in this post I would be super appreciative if you could share it with others who might also find value in it 🙂

Budgeting

How Much is Your Car Really Costing You

Posted on April 2, 2019

Do you know how much your car is really costing you? Find out today!

A long while ago I sat down to do my first budget and was amazed at how much money our car was eating up. It’s often one of those necessary expenses that you never really sit down to do the maths on. Let’s face it, some of us probably would rather not know the true cost of owning our vehicles. But if we choose to live in denial we can find our car costs in more ways than one, and can deprive us from living a life we truly want.

Everyone and their dog seems to have a car these days and more often than not they come with that ever recurring five or seven year debt repayment. And I sure as hell am not innocent in this, I too, have had car loans in the past.

If you have the option to walk or bike or catch public transport in your daily routine – skipping the need for a car can be a huge budget winner! But for anyone else they are often a necessary expense.

So for those of you who do have a car let’s end the guesswork between what we think out car is costing us and what is actually is costing the budget!

Why you should calculate how much your car is really costing you
If you find yourself living pay check to pay check and wondering where all your money is going, a good step is to delve deeper into your budget expenses. Particularly if you have a loan on top of all the other vehicle costs.

Once you see how much of your income is going towards your vehicle you can make an educated guess with how to proceed. Maybe you’ll decide your car is costing you too much and you want to trade it in for a more fuel efficient one or one that is more affordable, or sell it all together if you find it will be cheaper to take public transport. Or you might find that the car you have is the right one for you and decide to keep it. These are important decisions that are often left when it is too late which can cause unnecessary stress and financial strife.

Calculating how much your car is really costing you

All the costs below will be reasonably close to my own car expense budgeted costs and in AUD. Of course these will differ for your personal budget but hopefully these will cover all your relevant expenses and give you an idea to work out How much your car is really costing you. I did leave out more specific costs like Tolls which you may or may not have to pay, so feel free to add those in as well if they are relevant.

Here are the main vehicle expenses you will face if you own a car or other vehicle.

Petrol $50 a week ($2600/year)
One of the main costs associated with your vehicle is petrol. Especially if you have an inefficient fuel guzzler of a car.

Bank Statement Method
A good way to estimate your petrol cost is to check your bank statements for how much you have spent on petrol over the past 3-6 month period and to take an average e.g. $1500 spent on petrol over three months would mean your petrol costs on average $500 a month.

Tracking Method
If you have no clue of how much you have spent in recent months (you might pay in cash), take note for the next 4 weeks of what you spend in petrol and take the average weekly amount as your petrol estimate.

Average Fuel Consumption Method
You can also take the average fuel consumption of your car which you can find on car sites to calculate your approximate petrol cost, particularly if you are trying to assess the cost of petrol for a vehicle you want to buy and don’t know the costs already.

If you know the fuel efficiency of a car, how many litres (or gallons) it needs per one hundred kilometres (or miles) and if you know approximately how many kilometres (or miles) you get out of a fuel tank and the average price of petrol you can estimate the weekly costs as follows:

Petrol cost Formula =
(Total Kilometres per tank/100) (KM) x fuel consumption (L) per 100kms x average price of fuel ($)

So to demonstrate, if your car travels 650km on a full tank of fuel and your car consumes 7.6 Litres every 100 kilometres and the cost of petrol is $1.40

Your tank cost would be $69.16 [(650km/100km) x 7.6L x $1.40]

If that tank (in this example the 650kms) lasts you 8 days the daily cost would be $8.65 ($69.16/8) or $60.52 a week (7 days x $8.65)

Total Cost – Petrol $50/ $2600 a year

2. Maintenance Costs $250 Service $500 Repairs

Services
Most cars need regular services every 10,000 to 15,000 kilometres. Depending on how much you drive your car, this might need to be done every 6-12 months.
Services can range in price depending on your mechanic, vehicle type and if the car needs a minor or major service. If you take for a service at a big brand service centre it might likely cost you twice the price of a smaller mechanic, and if you are servicing your BMW versus a Camry, there will be a large price difference there too. My services generally range from $250-$500 AUD so I will just go with the lower estimate of $250 for my calculation.

Of course if you service your car every 6 or 9 months you will need to adjust your annual figure.

Total Cost – Services $250

Repairs
Repairs for your vehicle can also add up quickly and will need to be done as they are needed. You will need to replace tyres, brakes, fix oil leaks, cosmetic repairs and so on for your vehicle. Repairs will vary on whether you can DIY them or pay a mechanic. But a good conservative estimate to budget is $500 annually which might cover a set of new tyres which is the figure I have used for my calculation..

Total Cost – Repairs $500

3. Car Insurance (Fully Insured) $750 a year
If you are under 25 or a bad driver, this might look more like $1300 to you but lucky for me one of the only good things about getting a little older is your car insurance costs go down 🙂

Total Cost – Car Insurance $750

4. Greenslip (Medical Insurance) $650 a year
In Oz, we all must pay for Vehicle Medical Insurance which is called a Greenslip in order to register and drive our cars. It protects anyone injured in an accident and pays for their medical costs. My most recent one cost me about $550 for the year but let’s go with $650 as it can again vary with age and vehicle.

Total Cost – Greenslip $650

5. Registration $250
Once a year we pay car registration which is approximately $250 for a small car. For a wagon sized car this goes up to about $323 and up from there based in the size of your car.

Total Cost – Car Registration $250

6. Car Repayments

If you don’t own your car, you will of course also be paying car repayments which you need to add into your calculation. This is where a car can really blow the budget as you can see from the above expense inclusions, cars are costly enough without adding a loan repayment on top.

To demonstrate here is an example of a $20,000 loan at 7% interest rate over 5 years with a $10 monthly fee. The repayment would be 60 payments of $406 or $4872 a year for 5 years.

Total Cost – Car Repayments $406

How much is your car really costing you?

In the calculation below using the amounts we have detailed above as an estimate, this particular vehicle would cost you $822.67 a month or $9872.00 a year. On a $48k after tax income, this car would eat up an estimated 20.57% of after tax wages! And keep in mind these were very conservative figures!

I have calculated the above to demonstrate how much your car is really costing you so you can accurately predict vehicles and their associated costs in your budget. And so you can keep these in mind before making vehicle purchasing decisions so you can make the right decision for you.

By comparing how much of our after tax wages goes to cover vehicle expenses we can get a true picture of how much our car is really costing us. This might be the math we need to sell a car we can’t afford or make us think again before buying a new car with a huge loan to boot.
If you are finding it difficult to save money your car may be the culprit and this calculation will help you to identify if that is the case.

Hidden Costs
Of course the cost of cars does not end there, there are two more I wanted to touch on in addition to the above.

7. Lost investment returns

Now this one is something that you should consider as an opportunity cost for spending your money on financing a car. Of course cars cost money every month and some of those costs are unavoidable, but that cost is exacerbated when you buy a car on finance. Financing a car should really be a last resort and I am going to show you why.

Imagine if instead of borrowing $20,000 on a new car that you had convinced yourself was affordable, with a $406 monthly repayment, you instead invested that money. Now let’s say you invested that money into your Superannuation or 401k from age 30 to 65, a total of 35 years at 8%. When you are 65 you would have accumulated, thanks to the magic of compound interest – $931,316!

And that is just from investing your car repayment each month from age 30 to age 65. Not adding $1 over that a month to your retirement account. Imagine if you invested your car repayment that is $100 a month! We are literally throwing money away like it’s going out of style and future you is going to pay the price to now you can have a slightly nicer car!

And cars are money pits. Take it from a girl that just had two cars damaged by hail on the same day and had to fork over $1600 for an insurance claim. (I am certainly feeling the pain of vehicle ownership at the moment!)

So the next time you see a $20,000 or $30,000 car I want you to pause. Forget for a moment how ‘cheap’ the car is and how great it will be to drive around in it and calculate how much that car will truly cost future you with this calculator before you even walk into a car yard and even think about signing for anything.

8. Depreciation

Lastly, I wanted to highlight the cost of depreciation, which isn’t someone most people think about but as an Accountant and self-confessed nerd I must include this one. Cars lose a crazy amount of value as soon as you drive them out of the car dealership – everyone knows this and I’ll try not to bore you too much.

It something that should be taken into account. I did my own calculation on my car, which I did buy brand new back in 2016 (my first and most likely last new car purchase especially after above hail incident mention) and in the space of two years my car has depreciated by 25% or the equivalent of $5000 – $2500 a year. That is a lot of money to throw down the drain! Which is exactly why so many finance experts preach that if you do buy a car, buy one that is second hand and let someone else pay for that early depreciation.

Calculating your vehicle Depreciation
You can check your car valuation at Kelley Blue Book (US readers) or Drive.com and look up your car to see what it cost when it was first released and what it is now worth to calculate your approximate depreciation amount to date.

So if you bought a 2012 Camry for $25,000 and in 2019 its market value is $12,000 your car depreciated approximately $13,000 over the past 7 years – approximately $1000 a year.

Of course all cars depreciate but it doesn’t hurt to take this into account when deciding on a car. Particularly if you are someone who does a lot of kms with your car and you will destroy the value of your vehicle a lot quicker than someone who only does 10,000km a year with theirs.

And there you go, you are now hopefully armed with a little more information on how much your car is really costing you and how to make educated budget decisions when it comes to your vehicle!

If you want to calculate what your car is costing you you can download my Car Expense Calculation Worksheet. Simply download a copy from Google Sheets and fill in the monthly or annual column for your expenses and your After Tax (net wages).

This week’s comment question: Do you have a car repayment? Do you own a car/s or did you opt out of them all together to save money? Let me know in the comments below!

[Photo: Oli Woomdan @ unsplash.com]

If you found value in this post I would be super appreciative if you could share it with others who might also find value in it 🙂

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