How to increase your savings rate

“The rise of cost of living has put a huge pressure on all Australians”

“Australians are barely scrapping enough to ‘get by’ in the most extreme cost of living crisis”

You’ve probably heard these headlines before and honestly I’m getting really sick of them. It’s a disgusting narrative that the common consensus is that Aussies can’t save any of their income due to the cost of living crisis. Bullsh*t!

Look at it this way. Before the high inflationary period before COVID, were people saving their money? No! And even though rents, groceries and fuel has increased quite a bit, it’s still entirely possible to save +50% of your income. Now, your savings rate would highly depend on your overall income.

But in this article, I’m going to cover how to optimise your housing, groceries and transportation as those are your biggest basic living expenses. I’ll cover into a multiple parts where I breakdown first the BIG 3 expenses, then go into other smaller expenses.

And even for housing, groceries and transportation, I’m going to write an in-depth article for each as they deserve their own series.

With that being said, let’s get into a brief summary of how to save in each of those categories.

1. Housing

As everyone knows, houses cost a $1 million in Sydney and it’s impossible to get affordable rent. And I get it that the housing crisis is real in Australia.

However, as a young teenager or adult, I highly suggest living with your parents until your mid 20s, and save & invest all those savings into a highly diversified index fund or buy your first IP.

If it’s viable, living with your parents rent-free for the first few years of your young adult life will be a massive massive boost to your savings.

But I also get that not everyone has the privilege of living with their parents. If that’s the case, I’d look at renting a share room. I know share rooms aren’t something new, but they’re truly an effective way to massively reduce rent.

Paying for housing that you don’t use can be the biggest money waster in your life.

Here are a few ways to massively reduce cost on housing:

1. List out your spare room on Airbnb or rent it out to sharemate – This would depend on how your house is structured and your location. If you’re in a regional town or a suburb with quite low population, then it might be better to rent it out to a sharemate. But if you’re near the bustling cities of Sydney or Melbourne CBD, then Airbnb can be a lucrative way to earn extra cash to pay off your mortgage or rent.
2. Rent a shareroom – I know, I know, I know. Everyone knows about renting a share room and it’s a common strategy for youngsters. I would look at renting a cheap shareroom in a decent suburb that’s close to work.
3. You could try house hacking – I’ve heard of people that’ve done this but I can’t say for myself since I’ve never been remotely interested in “housing hacking”. If done right, it can be a lucrative way to get your tenants to completely cover the cost of your rent/mortgage. However, I wouldn’t recommend it since it doesn’t account for the time and effort required to bring in tenants, the extra bills you’d have to pay for vacancies, headaches, repairs, etc. Uhh just thinking about this makes my head spin. I know cause evening owning an IP I experience this on a day-to-day basis.
4. Live in a caravan home
5. Live in a container home
6. If possible, share a shareroom with your partner. I searched it up and it seems like some home owners would allow this option. I know it’s a bit of a stretch but let’s say you were renting out a shareroom for $250/week. If you lived together with your girlfriend/partner, you’d instantly save $125/week. That’s $6375 per year! That’s the equivalent of getting a $9107 pay rise yearly (this is because you have to pay 30% tax on every dollar you make, so it turns out to be $6375 after-tax).

2. Transporation

Other than housing, transportation is the second biggest expense. Actually sometimes, transportation can equally be as big of an expense as housing for a lot of Aussies, as we’re notorious for purchasing cars on loan payments and buying brand new cars we clearly don’t need.

It’s absolutely ridiculous how much the average family spends on an individual car every year.

Let’s say Person A decided to purchase a $40k car. But because Person A doesn’t have $40k in the bank to buy a car, he decides to buy it on a 7-year loan payment at 7% interest rate (which is being conservative).

That means he’ll be paying $620 monthly, which doesn’t sound like much but it adds up to $52,080 over the course of the loan. That means he’s paying over $12k in interest payments alone! All for the sake of buying a damn car!

Here’s how much the annual expense would be for this car including the purchase price. For simplicity, I’m not even going to include depreciation.

• Car Purchase – $7,440
• Fuel – $2k
• Rego – $900
• Insurance – $300 (third party)
• Repairs – $500
• Total: $11,140

$11,140 every year just to own a car! Do you see how outrageous that is!!! It’s no wonder the average Australian is broke AF.

So the question is, what are some ways to save costs on transportation. Let’s dive into the details and find ways to massively reduce your transportation costs.

• If possible, try not to live without a car. I know this isn’t viable for everyone, but living without a car will save you $1000s if not $10,000s per year. That’s why I suggest living in a more slightly expensive house/share room where the location is much more conveniently located next to train stations, shops, and other amenities you can access. That’s a huge bonus, especially if it’s close to your work! If you live in the CBD, I would ditch the car and ride your bike to work. It’s faster, simpler, less stressful and more eco-friendly.
• If you’re in a job field where working remotely is a viable option, you can consider taking that route and switching to remote work. Or if you still find going to the office enjoyable, then you could negotiate a hybrid role. Either way, working remote has become a popularised working trend since COVID. And if you’re company requires you to stay in the office, consider applying to other jobs and moving to a different role. Personally, I decided to work in the office just because I so much more focused, but if you like working remote, then it’ll save you $1000s per year in fuel, repairs, maintenance, wear & tear of your vehicle and 100s of hours.
• Ride a bike/electric scooter to work if possible. Or even if you don’t ride a bike to work, I’d highly recommend riding your bike when going to the shops, post office, or whatever errands that require you to travel. Even doing that alone will save you quite a bit in fuel costs, reduction in your insurance and less repairs required for your car.
• Public transportation – Pretty common option. Although public transportation ain’t super cheap, it’s still cheaper than using a car to commute to work. I guess that depends on how long your travel distance is. Lots of factors to consider but it could be a viable option to commute.
• Carpool with your coworkers/friends – I’ve personally never done this before but if one of your friend(s) workplace is right nearby to where you work, then carpooling together can halve your car cost. Plus, it takes out the stress of finding parking which is the worst.
• Never take out a loan. Always get a second-hand car cash.

3. Groceries

With the rising cost of groceries over the years, you might think it’s impossible to eat a healthy diet whilst keeping your budget under $100/week for a single person. Well, I can confirm that it’s 100% possible since my grocery budget is $50/week.

Here’s quick breakdown of what I get for groceries:

• Rotisserie chicken – $12
• Tofu – $5.60
• Rice – $2.50
• Honey sauce – $2.50
• 1 large cucumber – $2
• 1kg of carrots – $2
• oats – $1.60
• Soy milk – $4
• Protein powder – $10
• Total – $42.2/week

I only spent $42/week on my groceries, and that’s because I meal prep every week and pretty much eat the same thing every day. Now, you don’t have to eat the same thing every day as I do. But I like to keep these simple. But what I’d recommend is creating something like a 4-week meal prep plan where each week you set out your breakfast, lunch, dinner and snacks, and you alternate every week to different sets of meals.

I choose to intermittent fast so I don’t eat dinner. Instead, I consume 2 protein-rich breakfast and lunch the fills me up for the rest of the day.

For breakfast, my go-to option is protein overnight oats and lunch is a delicious fried tofu chicken rice.

Now to get into it, here are some ways to save on groceries:

• Buy only what you need – I know you don’t need to buy those cookies or special deal section items. Stick to only what you need. By creating a meal prep plan and a grocery list, you’ll reduce the chances of you buying things you don’t need at all.
• Buy store brand – Store brands used to taste like crap buy nowadays, they taste just as good as the popular brand foods. They literally are the same exact product, except store brands are like 20-50% cheaper.
• Consider doing online grocery shopping through Coles or Woolworths, and use FluBuys to get discounts. I know ALDI is much more affordable than Coles or Woolies, but I think it might be worth getting deliveries recurring every week instead having to go to the shops by yourself. What you could do is set it to order the same thing every week, which saves time and hassle of driving to the shops, finding parking, pushing around a trolley and picking out your groceries for 1 hour.

How To Get Started?

I know there’s a lot of things that I’ve mentioned and it can be overwhelming to implement all these changes all at once. If you feel overwhelmed or don’t know where to start, remember to take it one step at a time and you’ll do just fine.

For example, I would start with housing first, and view all the viable options. If you’re a teenager living at home with your parents, then you won’t need to worry about it too much. I’d then move onto groceries. Since it’s most likely your parents pay for groceries, I would not focus too much on it. However, I believe it’s still immensely valuable to learn the art of meal prepping and how to save money on groceries since it’ll come in real handy later down the track.

Then if groceries are optimised, I’d move onto public transportation. Etc, etc, etc.