8 January 2013

Reducing the cost of living 1

We were really moved by your kind and thoughtful comments yesterday. Hanno thanks you, I do too and though it might sound strange to people outside the blogging world, knowing there are thoughts and prayers being sent to us, makes a real difference.


Sometimes I wish we were born with a rewind button. You sail along building debt with a home loan, credit card debt and a car loan that you thought you'd easily pay. Then on top of that there is your phone and your partner's phone, broadband, pay TV, gym memberships, insurance, your holiday, the kid's camps, entertainment, your new iPad, laptops for the kids, clothes and shoes for everyone, education costs and toys to make the kids happy. Oh, and don't forget food and fuel, both must be bought every week. If only you could press rewind, go back a few years and make more prudent choices. Life would be easier if you didn't spend like this. 

I'm sure there are people reading here who do live according to that first paragraph. There are probably some who see no problem with it, as well as some who wonder why they fell for it but see no way out. If you are that person, or you're about to become her or him, stop and consider this: debt with weigh you down, it will take you away from your family, it will suck the strength out of you because your hours will always belong to someone else. It doesn't have to be like that.

Don't get caught up in the ridiculous notion that the more you have, the better your life will be. Everything has a price attached. Most of the time, that cost is both financial and environmental. Very early on in my own change, when I went from spending a lot to becoming very frugal, I realised that the less I spent, the more I did for the environment, the more self-reliant I became and the more I was in control of my own future.

If you buy a house worth close to a million dollars (it will be two million when you calculate in the interest), and for overseas readers, many houses in Australian cities cost that much now, you will be working to pay that off for the rest of your life. Before you dive into that level of debt, consider what would happen if you get sick and can't work. Or if you just get sick of paying off the debt and can't do anything about it. You don't have to live in a big city. Life happens in other places too. You can get a very good home for $300,000 in most places outside the large city precincts. If you work hard, you could pay that off in 15 years instead of 30 years. Imagine the freedom you'd feel if you paid off your home 15 years early. It's possible.  We paid off our mortgage in eight years. 

We all live in a home of some sort so that requires either a mortgage payment, rent or the ongoing local council rates we all pay. We all eat, most of us have cars and need to fuel them, we have phones, we have to insure our possessions, many of us have health insurance. We all have financial commitments to cover the cost of our needs and to keep us sheltered and fed. Once you have those expenses covered, the less you spend on everything else, the less you'll have to work to pay for. That's the trick - keep those costs down and you'll be ahead all your life.

Over the next couple of days we'll talk about a more modest life, living within your means and taking the small steps needed to live well on less. If you step off the merry-go-round and follow a more frugal and prudent path, you will get your life back, you'll have more time with your family and you'll have time to do what you want to do.

But the first thing you need to do to make the whole thing fall into place is to change your attitude about what success means to you and to fully understand that money and possessions don't make you happy. There has been research done that found once our basic needs of shelter, food and clothing are met, we are not made happier or more fulfilled by having more. If you're not convinced of that, that is where you should start because if you change your attitude to accept a simpler life, all this will be easier for you.  And what a good place to end. Tomorrow we'll start talking about keeping day to day expenses low. If you have some financial tips to share on paying off a mortgage or how to keep the cost of housing low, please share them with us in the comments.

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