Cut the cost of living
Moving to the big city and buying a new car have taken a financial toll
NAME: Liana Mann
STATUS: 25, single and feeling stressed because of the high cost of living.
QUESTIONS: What is the best way to budget and save? How do I set up and stick to a long-term financial plan? How do I live comfortably in Sydney without having a panic attack when I look at my bank account? Can I afford to run a car?
ANSWERS: First, set up a budget. Live on your earlier, lower salary and use the difference to pay down your credit card debt as quickly as possible. Work out if the cost of paying off your car is worth it and even whether you need a car in Sydney. Cut up your credit cards.
When Liana Mann moved to Sydney from the NSW north coast two years ago, she knew the cost of living in a big city would be higher. But what she hadn’t realised is just how much higher it would be.
“I don’t live an extravagant lifestyle. In fact I have stopped going out almost altogether to minimise the lifestyle expenses I’m exposed to in Sydney,” says Liana.
She recently read an article about a Sydney girl who, like her, worked in advertising and had asked her bank if she could “take out a loan to afford her life”.
“I earn a decent wage and honestly cannot seem to pay off my credit cards or keep my monthly savings in the savings account,” says Liana.
She isn’t alone. A recent Ipsos poll of Sydney residents found that 77% of 18- to 34-yearolds say that cost-of-living pressures have intensified over the past 12 months.
Liana is paying down her credit card debts. She applied for a personal loan to consolidate her debt. It would halve the interest she pays on her two accounts but the bank declined her request, saying that her rent of $365 a week was too high. “It seemed like a rational, adult decision. It was a bit of a hard pill to swallow.”
Liana also has a car loan of $35,000. When she sold her old car, she was offered a great deal on the trade-in and finance for a new car. Coming from the country, where cars are essential to get around, she sees it as necessary to have a car in Sydney too. But can she afford to run it?
She is cutting her living costs, particularly for coffee and eating out, by making food at home and apportioning it out for the week. By making coffee at home four days a week and only buying it on Friday, Saturday and Sunday, she estimates she saves $1300 a year.
Liana has set up a number of bank accounts for her main costs: rent, transport and car loan, everyday expenses and savings. She has an additional long-term savings account with ING, plus its Savings Maximiser account.
Eventually, Liana would like to have a property portfolio and wants a long-term financial strategy to be able to work towards this. “I really want to save for a deposit on my first house but at the moment, if I can’t afford life, I feel like I can’t afford to save for a deposit.”