I have a good job. My income is high, six figures, and we live a comfortable life. But I am going to level with you here for a moment. The events of 2022 have left me feeling anxious and a little scared, to be honest with you. When central banks started hiking interest rates, nobody knew when they would stop (they still don't).
I live in Australia, and just before interest rates started to go up, we got a mortgage for our forever home. Oh, that mortgage we got was variable rate, not fixed either. The messaging from our central bank was interest rates probably wouldn't start to increase until 2024, possibly 2025.
Queue the rekt gif.
Due to the rate increases in the past few months, we have been quite careful about how we spend our money (or don't spend our money). We are a single-income household, so we have to balance our expenses with income, so we don't live beyond our means or go into financial stress.
And despite the increased cost of living for essentials (as well as non-essentials), I see people making the same mistakes, stuck in the same patterns they were in during the pandemic when money was cheap, and interest payments on debt were lower than Sam Bankman-Friedman's net worth.
If you have to use buy now, pay layer services to purchase things, you are living beyond your means. PayPal Pay-in-4, credit cards, drawing down on your mortgage, anything that sets you back is living beyond your means. And it's possible you might be in that situation because you're stretched thin.
People are still buying new phones (the latest iPhone is expensive to buy outright, even more, expensive on a plan). Others are buying new cars even though buying a new car right now is probably one of the worst things you can do (even used cars, despite stabilising market conditions, are still too inflated). My young sister has a credit card and eats Uber Eats at least three times a week, then asks to borrow money for fuel to get to work shortly after.
The cost of cheese and milk has gone up, and the cost of fuel has increased astronomically, but sure, let's Uber Eats a large McDonald's meal for $20. Wake up.
Most people earn enough money to live a good life compared to the incomes in developed nations. There is a good chance you earn enough, but you have no money all the time because you have a spending problem, not an income problem. We live in a "now" economy. We are used to spending for instant gratification. Netflix lets us watch on demand, Spotify lets us listen on demand, and Uber Eats lets us eat on demand.
Everywhere you look, we are surrounded by marketing and services designed to extract our hard-earned money from our banks and into the hands of corporations. The same corporations increase the price of goods and services, some of them well above the rate of inflation. It's a rat race, a game you are a part of, and the winner isn't you.
How I spend money
A lot of my spending behaviour right now is long-term thinking. I'm not spending my money for instant gratification. I am thinking ahead. Some people call this a ten-year plan. Your decisions can profoundly affect your quality of life in ten years.
- I have cut all takeaway coffee from my expenses. Instead, I offset the amount I was spending on coffee ($5 per day, on average) and put it into my savings account. If I want coffee, I'll make it at home, or if someone else buys me a coffee, even better. I grow my Arabica coffee beans. It takes a while to process and roast them, but the outcome is better coffee than some of the crap they sell at cafes.
- Every month, I'll invest some money into stocks. Right now, there are some dirt-cheap stocks. It varies what I buy and spend. But some of the stocks I've been buying are; Tesla, Apple, Facebook, Google and a few random stocks for banks. Eventually, these stocks will pay me a dividend, and instead of working for my money, my money will work for me. I'm spending, on average, around 10% of my current income on stocks.
- Cutting meat out of my meals three times a week. Despite being an agricultural country, the cost of meat here in Australia is exorbitant. Despite being a meat eater, I will have a lovely vegetarian meal four times a week.
- Leading off that previous point, my vegetable spending has decreased on the groceries bill because I have grown many of my basics. Tomatoes, potatoes, onions, garlic, carrots, broccoli, spinach, kale, two varieties of beans, shelling peas, snow peas, chillies, and a few other things. I also pickle and preserve the excess (especially for my chillies).
- I substitute store brands for named brands... for most things. I will never compromise on cheeses and olive oil, especially olive oil. The store-brand cheese and olive oils are okay if you're struggling, but it's something I won't compromise on.
- I have an emergency fund for tyre punctures or household emergencies.
- I have another fund which has money for my household insurance excess payment ($750) and my car insurance excess payment of $280. If I have an insurance claim to make, I have the excess payment money available.
- I have a good health insurance plan. It's over $400 per month, but it covers everything for me, including a generous allowance for general and major dental, and chiropractor visits, remedial massage and other treatments. Working at a desk means I am prone to these silly issues a specialist can sometimes only fix.
- I don't spend money on alcohol anymore, except the occasional bottle of scotch. I brew my beer, so I don't buy that. If I go out for dinner or drinks, I'll buy them there. That's the only exception.
As a result, I have emergency funds and investments that will hopefully pay off as the economy begins to heal and markets bounce back. But the best thing I've done during 2022 is cut out unnecessary purchases. Anything I can live without, I won't buy. This means no new phones even if my phone is cracked.
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Being intentional about our spendings is the best step we can take because this will affect our future in some years time in the best possible way.
Cutting out unnecessary expenses is something I have always done and this coming year, I am more serious because savings is something I have come to enjoy doing. It's not for today but for the future where I wouldn't have problem needing money.
It's the mindset that have served me well in the better times leading up to the current state of affairs. I am also the sole bread winner of my household. A common sense approach to frugality yet prepared for emergency issues without taking away too much of a reasonable level quality of living.
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It sounds like you are doing an admirable job of becoming self-sufficient. This will definitely cut back on your living costs.
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The first investment to make is savings, really well done and thanks for the food for thought, I haven't done some things yet but I was thinking of starting such as making beer for example. Thanks for sharing 🤗
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