Cut the cost of liv­ing

Mov­ing to the big city and buy­ing a new car have taken a fi­nan­cial toll

Money Magazine Australia - - ASK THE EXPERTS -

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.”

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