Zest! / SUPER 101

Prioritise today and save for tomorrow

Current costs are important but don’t take from the future to pay for the present.

By Hannah Tattersall - 3 min read

A little about Hannah

Hannah Tattersall writes about a range of topics, including personal finance, money and business.

My husband and I recently had the development application finally approved on our home renovation. We spent last year working with our architects on adapting our plans to accommodate council feedback, enlisting heritage consultants and arborists to provide information and documentation, and making sure we had the support of our neighbours—should we ever get to this place.

Well now we’re here, and yes, it’s exciting, but it also feels daunting. Because on top of our (increased) mortgage repayments, our usual family expenses and the rising cost of living, we now have to work out how to pay for it.

With so many competing demands (think mortgage or rent, school and daycare fees, food and bills, to name a few) many Australians are finding their finances are tighter than usual. In its most recent report on Living Cost Indexes (LCIs), the Australian Bureau of Statistics (ABS) revealed living costs for employee households rose 6.9 per cent in the year to 31 December 2023.

And while the cost of living is going up, average earnings have increased—specifically, the Average Weekly Ordinary Time Earnings increased by 4.5% for the year to 30 November 2023. While you might think this means more income—and it is—it also means a decrease in purchasing power when set against higher living expenses. And when the cost of living increases faster than our increasing incomes, our discretionary income (meaning what’s left over after taxes and essentials) is likely to decrease, which impacts our standard of living.

Setting priorities

For my husband and me, managing our money is about working out our priorities and budgeting to ensure we have enough to cover our expenses, both in the short term and the long term. We have been saving for our renovations for some time and have been factoring in an upcoming mortgage rate rise as well. Shopping around—whether it’s for a better home loan rate, cheaper groceries or a holiday deal—is now simply part of life.

Last year, we skipped going on holiday to save for our renovation, but it affected our mental health terribly. Some expenses (like for us, taking a holiday) are non-negotiable. Another is food. We have to eat. But these days we think twice about going out for a family meal or buying takeaway, as dining out has become so expensive.

Superannuation is another non-negotiable. Because I work as a contractor and freelance writer, at the end of each financial year I set aside a chunk of money to transfer into my super fund. I could decide not to do this this year in order to save more for our current living costs. But, due to the compound interest I'd be missing out on, I'd only be hurting my super balance in the long term.

We have a budget planner to keep track of ongoing immediate costs such as bills, food and groceries, meals out, childcare costs, extracurricular activities, gym memberships, haircuts and beauty expenses, gifts and clothes—and the list goes on. Once you list absolutely every cost in your budget planner, you realise where your biggest costs are and which areas to potentially cut back on.

Every little bit counts

There are other ways to save too, and while they may seem small, it all adds up over the course of a year.

Many people are opting to pay with cash again or use a debit card rather than a credit card to avoid unnecessary fees and surcharges, for example. Businesses incur costs for processing certain card payment types and some pass these on as a surcharge for paying with a card. As a guide, the Reserve Bank of Australia estimates the average cost for Eftpos is less than 0.5%; Visa and Mastercard debit is between 0.5% and 1%; and Visa and Mastercard credit is between 1% and 1.5%.

While a business must include the minimum surcharge payable in the displayed price for its products, it can still come as a surprise when you see the final amount you paid for an already inflated $5 coffee ($5.44 for me at one cafe recently) or an extra $1 on a purchase less than $10 if you’re paying by card.

I’ve become very fond of loyalty programs. As well as the big supermarket loyalty programs, many stores offer incentives for repeat purchasing. There are also ‘tenth coffee free’ cards at many local coffee shops (if you don’t want to cut your coffees altogether, these will at least save you some of the cost); and petrol programs offered by the major fuel retailers.

These small savings may not make a huge difference to our outgoing costs now, but they mean we’re not taking from tomorrow to pay for today. And we can look forward to a future where we have what we need—including a super balance to help fund our retirement—and hopefully even a renovated house.


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The views and opinions expressed in this article are those of the author and do not purport to reflect the views and opinions of Russell Investments.

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