Finance is a constant thing – it’s important to update your budget as circumstances change, whether that’s a result of a career shift, a raise or new expenses.
Each time you update your financial plan, it’s easy to overlook expenses you consider to be “fixed”. You might think of these as non-negotiable, but is there a better way to manage your fixed expenses?
When we talk about fixed expenses, we’re referring to recurring costs – things we’re billed for regularly, be they necessary or luxury.
Fixed expenses often include:
Basic needs now account for 60 per cent of our spending, according to the ABS.
There are some fixed costs which are required to live. However, weekly spending on energy, housing and medical needs has risen over 25 per cent over the past six years, says the Australian Bureau of Statistics (ABS). In fact, basic needs now account for 60 per cent of our spending.
Meanwhile, unnecessary recurring costs such as an unused Netflix subscription, a lawn mowing service or a landline fee, may be small expenses that quickly build up to draw funds away from your savings.
Breaking free of this idea that fixed costs are “okay because I can predict them” is the key to developing an effective budget.
Follow these steps to optimise your budget:
1. Isolate your fixed costs: Determine how much you spend on these expenses each month. Then, figure out which ones are temporary or unimportant.
2. Let go of unnecessary subscriptions: Say goodbye to any unused memberships or other luxury expenses that you can still feel comfortable without.
3. Build a plan to eliminate temporary expenses: Mortgages are expensive, but they aren’t forever. Create a strategy to pay off your loan faster and create more room in your budget.
4. Find a better deal: Power is a basic need, so you can’t simply forego it. That said, is it possible you could get a better deal? The same goes for payments on your broadband, mortgage repayments or rent, and even grocery bills. Shop around for the best deals on the market but stay wary of promotional periods making something sound better than it is.
What you need to know
This information is provided by Invest Blue Limited (ABN 91 100 874 744). The information contained in this article is of general nature only and does not take into account the objectives, financial situation or needs of any particular person. Therefore, before making any decision, you should consider the appropriateness of the advice with regards to those matters and seek personal financial, tax and/or legal advice prior to acting on this information. Read our Financial Services Guide for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relations to products and services provided to you.
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