​Financial Hygiene for New Parents

Mon June 10th 2019

Welcoming a new baby is exciting, but it can also puts a strain on things – not the least of them are your finances. When it was just the two of you, there was probably more fat in the budget. It was easy to just spend without thinking, and you were probably actually wasting a lot of money.
The good news is that with a little bit of energy and focus, the savings you make could reduce stress – and make your new family life even better.

Ten ways you're wasting your money

Welcoming a new baby is exciting, but it also puts a strain on things – and not the least of them are your finances. When it was just the two of you, there was probably more fat in the budget. It was easy to just spend without thinking, and you were probably wasting a lot of money.

Even if you're both back at work as soon as possible, the costs of an extra person at home can add up fast. So it's time to get serious about cutting out that waste and establishing some financial hygiene.

The good news is that with a little bit of energy and focus, the savings you make could reduce stress – and make your new family life even better.

Here are the ten ways you could be wasting your money, and what to do instead.

You don't pay off your credit every month

It's so easy to rack up debt on your credit card and pay just the minimum every month. It means you get the things you need and want immediately, and worry about paying for them later. The downside is that since you're putting off paying, it's far harder to stick to a budget.

You think you're saving by buying that item on sale? Think again. Unless you pay your card off fully each month, that savings gets swallowed, and then some. On a $1000 purchase at 18% interest, you can make minimum repayments, spending about $170 on interest and still owe about $940!

Here's what to do instead

Transfer your cards (and debt) to another bank offering a zero-interest period. Then cut up those old cards, and make a plan to pay off the debt before the zero-interest period ends. You could also ask your bank for a debit card – this offers the same functionality as a credit card, but without the crippling debt.

You haven't reviewed your mortgage structure in a while

It's easy to just pay your mortgage automatically, and not have to think about it. The trouble with that is things change, your life changes, and your goals shift. You might not need to pay so much every week – or it could be smarter to pay off more. You could also be leveraging the money tied up in your house to do alterations or to pay down other, more expensive debts.

Here's what to do instead

Sometimes, changing the structure of your mortgage can save you money. You might switch some or all of your loan from a floating rate to a fixed rate, for example. You could consider a revolving mortgage, which might be a higher interest rate but allows you to spend on big ticket items like a baby-friendly car, house repairs or renovations. That way you avoid racking up expensive credit card debt.

Or take your mortgage to another lender. Before changing, it helps to look carefully at the costs and possible savings. Your existing lender, another lender or a mortgage broker could help.

You haven't looked at your insurance recently

Like your mortgage, insurance isn't set and forget. You need to keep looking at your policies and updating them as your circumstances change. Life events like marriage, birth, and house-buying can change your insurance needs dramatically – whether that means more cover, less, or something new.

Here's what to do instead

Talk to a broker about what your life looks like now, and ask for help in designing the perfect mix of insurance. You may save money – and you'll certainly be confident that you have the right cover if anything happens.

You eat takeaways regularly

It's not uncommon to spend $8-10 on a single lunch – and much more if you're buying dinner out. Let's say only one of eat out for an $8 lunch during the work week. This still adds up to $40 a week, and $1920 a year. The same meals cooked at home can cost a fraction of that. Add a couple of takeaway meals a week, and you've wasted close to 5k a year.

Here's what to do instead

By all means, budget for a treat now and then, but make cooking at home your norm and you'll save thousands – and your waistline will thank you too. If you're pressed for time (one of the excuses for eating takeaways) get into a routine of making double meals, and stick the half you don't eat immediately into the freezer. You could even store food in lunch-size portions to defrost at work.

You're paying for unused subscriptions

Every January, hordes of people flood their local gyms to sign up for memberships. By March, the gyms are almost empty. If you're using the gym –

or any other subscription service, like Sky TV, Spotify, Audible or Koru Club – and it provides value for you, that's great! But if not, you're burning money every month.

Here's what to do instead

Go through two-months' worth of bank statements and spot all the charges you're incurring. Ask yourself if you're really using those services, cancel the ones that are a waste, and make a plan to find cheaper or free alternatives that you actually use.

You're buying Lotto tickets

The chances of your seven numbers winning is about one in 38.8 million, whichever numbers you pick. The odds of being struck by lightning are 'just' one in 10 million – four times as likely! Believe it – Lotto tickets are almost always money down the drain.

Here's what to do instead

Put $20 a week into a bank account and then forget about it – in 5 years you'll have well over $5k. When was the last time you won that much at Lotto?

Your car and house are costing you money

Sometimes it makes sense to spend money to save money. If you're driving a very old or unreliable car, you can expect to pay thousands of dollars a year in repairs. Similarly if you have a drafty, damp, uninsulated home, you're almost certainly overspending on power of one kind or another. Your doctor bills could be an issue too – damp houses are notorious for being health hazards.

Here's what to do instead

Invest in a newer model of car – it could mean the savings in repair bills will offset the cost of the vehicle. Certainly, a newer car will be more fuel-efficient, so your petrol bill will go down too.

In your house, repair drafty windows, and install excellent insulation. A heat pump and/or a ventilation system will return dividends – your home will be easier and cheaper to heat come winter. It will also be far dryer and healthier to live in, cutting down on visits to the doctor.

A mindful financial tidy-up

There are so many easy things you can do to put your financials in order. Go for a daily run instead of paying to run on a gym's fancy machine, dump Sky TV and subscribe to Netflix, and insulate your house. Check your mortgage and insurance for any needed changes, get in the habit of cooking at home (and grow your own veg if you can), and never buy another Lotto ticket.

You can do any or all of these things, but the key is to be mindful of where your money goes. That way, you can have all the things you really need – good health, a comfortable life, less stress and plenty of happiness with your brand new family.

Talk to Cave Financial today, for advice on how to acheive financial hygiene.

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