THEY’RE the hidden costs that are costing us dear. The expenses that might be out of sight but shouldn’t be out of mind. We’re the set-and-forget generation, allowing thousands of dollars to leave our banks accounts with barely a second thought. Yet, we’ve never been more concerned about how much cash we have.
“Lots of people don’t really care. It’s a pain in the a*** to change banks or even speak to your insurance company so it’s easier for most people to b*tch than to switch,” says finance expert Scott Pape from the Barefoot Investor.
“I call it the lazy tax. Banks and financial institutions know human psychology and that the average person spends more time choosing their footy tips than their super.
“If we spent the same amount of time on super, that we did on choosing teams to win a $100 meat tray, we would save tens of thousands of dollars,” he told news.com.au.
Some items we spent money on were so unnecessary, we were essentially paying a ‘w*nker tax’, he said.
It’s not just the big things. From streaming services to catching the train, there are savings to be had, we’re just not getting them.
According to the Australian Securities and Investments Commission (ASIC) we spend a whopping $642 billion annually on living costs. Canberra’s households spend the most, forking out more than $1500 a week on everything from rent to fuel and insurance while South Australians spend a third less at just more than $1000.
The biggest household expense is rent, at $223 per week, followed by transport, including petrol, at $193 and recreation at $161.
Spokeswoman for comparison website finder.com.au, Bessie Hassan, said Australians were adept at enabling money to leave our accounts but far less savvy when it came to stopping the drip, drip, and drip of unnecessary payments.
“Often, this is in order to solve a requirement — car insurance, quick credit, electronic tolls. But once this need has been taken care of, it’s very easy to mentally mark it as ‘done’ and then forget about it.”
Analysis by consumer watchdog CHOICE last year found 66 per cent of consumers were trying to cut back on their spending with 59 per cent looking at axing non essential costs with power bills the number one cost concern.
“The best advice is not to auto renew,” Choice spokesman Tom Godfrey says. “If you do nothing when you get your bill you are not getting the best deal. The bill should be a call to action to get all the providers on the phone.”
Mr Pape said there were four key expenses we couldn’t afford to let slide.
“I can’t stick to a budget, but if you focus on a few of the really big things — your mortgage, your car, your super and your job — and make sure you not getting ripped off that basically covers it.”
He recommends the 60/20/20 rule. Spend the majority or your salary on ‘safety’ items, like the mortgage, food and car; 20 per cent should go directly to you savings account and the remaining 20 per cent can be splurged on shoes and booze and holidays to Bali.
But, if you don’t know where the pennies are going, you won’t be able to splurge.
“Ring your bank,” says Mr Pape. “I call it the $40,000 phone call. It costs banks thousands of dollars to get new customers in the door so they don’t want to have to replace you. Say you’ve got a better deal and they should match it. I have had hundreds of people tell me they have saved themselves thousands by doing that.”
Even if you leave your current mortgage provider, the savings for new customers elsewhere often outweigh the exit fee.
“The most common hidden cost is due to Australians accepting insurance renewals without checking the market to see if they can get a better quote. Other insurance companies are always looking for customers, so you will often find a better deal by shopping around — especially if you have a good track record in regards to claims,” says Ms Hassan.
“The other one which is a rip off is superannuation. The industry is sitting on $22bn in fees and most people have no idea where there super is sitting.” says Mr Pape pointing out that most people have more than three super accounts, all of which will be siphoning away fees. Pick the best account for you and say sayonara to unwanted super.
“If you are earning $30,000 and you are driving a car that costs more than $50,000, that’s a w*nker tax and you need to pull your head in.” said Mr Pape. Expensive cars had expensive servicing needs he said. Get a reliable car and save.
Despite all the ballyhoo about low prices, Australians are actually more likely to choose where to shop based on how close the supermarket is to their home rather than its value-for-money, according to Roy Morgan data. Research by Choice found by foregoing big name brands and shopping at discounters, like Aldi, shopping bills could be slashed in half.
‘Think twice about rewards programs,” said Mr Godfrey of promotions like Woolworths Rewards and FlyBuys. “People who use these programs often pay more and deny themselves seeking out retailers with more competitive offerings.”
Smart card users, such as NSW’s Opal and Victoria’s Myki, are some of the worst set-and-forgetters. If you have auto top-up activated on your bank account it’s all too easy to tap on and tap off oblivious to the cost. In NSW you could pay up to $60 a week for travel; but if you get the train outside the peaks your travel costs plummet by almost a third. Myki could set you back $50 a week, but arrive at work by 7am and you travel absolutely free.
Petrol is one of the biggest recurring costs and we are all be guilty of not shopping around. There’s all sorts of tips and tricks, from filling up at the bottom of fuel cycle to just filling up less. But one of the best hacks is simply being a smoother driver and lay off the accelerator.
The world of recreation is a dark hole of forgotten fees, experts warn.
“Subscription services such as Netflix, Presto, Stan and Spotify are a regular payment people often forget about — which is easy because they are small amounts but they add up over the course of a year,” said Ms Hassan.
“Remember — you don’t have to keep a rolling subscription, it is poss
ible to pay for these services month-to-month as you need them.
Ever used a file sharing service like Dropbox or Hightail? If you signed up to a plan but you’re not using it, that’s $140 a year slowly shuffling its way out of your wallet. So-called free gaming apps can also be a money pit if your getting persuaded into buying new lives or tools. 99c may not break the bank but every day it will make you pay.
And the worst offender when it comes to slowly sucking the lifeblood from your savings? “Do not do credit cards,” says Mr Pape. “Don’t talk to me about points, or redeeming awards you won’t get.
“Focus on the really big things and the little things will follow.”