Episode 1. Living Within Your Means
We’ve all heard the phrase – learning to live within your means. It’s a great theory – but, come on, who really lives within their means these days. And so we spiral into debt – that’s why so many are drowning in it.
Why don’t you join Berni with his special guest Ross Buttenshaw as they take a look at money – from a different perspective.
We’ve all heard the phrase – learning to live within your means. It’s a great theory – but, come on, who really lives within their means these days?! And so people spiral into debt – that’s why so many are drowning in it.
We’re continuing on this week by taking a good hard look at money. How we earn it, what we do with it, how we spend it and the impact it has on our lives. And to do that I’m joined again by my special guest Ross Buttenshaw.
Now if you were able to join us last week you’ll know that Ross is the Australian director of an organisation founded in the UK called Christians Against Poverty or CAP as it’s known for short. And what he and his team do is they help people who are struggling with their finances. So he lives at the coal face, if you like, of managing finances and sees the reality of the problems that people have and how they struggle with money and debt.
Last week Ross gave us some really practical advice on managing our finances and I know he’ll do that again this week, he’s just kind of that sort of guy. With countless people, especially let me say, people in the wealthiest countries of the world drowning in debt, one of the things surely we need to learn how to do is to live within our means. Ross, welcome again to the program today.
Ross: Hi Berni, good to be back.
Berni: Good on you. Ross, I often wonder why is it that the wealthier nations become the more difficult it seems to be for us to live within our means?
Ross: Well, I think we’ve got lots of growing organisations selling products, wanting to make money and we seem to have the ability to spend money not always our own. We’ve got a lot of credit available and therefore we are a target for material and consumer products.
Berni: The advertising and retail industries are pretty good at getting us to impulse buy, aren’t they? Whether it’s chocolates at the supermarket check out or let me tell you, I go to a coffee shop that’s off a dealership of very expensive cars and the number of people who go in for a coffee and buy one of these cars you wouldn’t believe.
Ross: We are getting smarter at selling our products.
Berni: Quite an up sell isn’t it?
Ross: Yeah that is a great up sell.
Berni: Would you like a car with your coffee?
Ross: That’s better than would you like a burger with your fries?
Berni: Yeah that’s right. What is this whole impulse buying say about us? I mean when we stand back what’s going on in our psyche?
Ross: When it comes to impulse buying people want to feel good about themselves. It’s probably more psychological, more issues in our world today than there ever has been and in some sense buying nice things for ourselves can make us feel good.
Berni: Retail therapy.
Ross: Yeah it’s given that name. I think we use that tongue in cheek but there is a reality to it.
Berni: And of course it might put us on a high for a little while but then people often find themselves in debt and they’re struggling with repaying this debt.
Ross: Buying things without your own money is a temporary feel good.
Berni: See the banks don’t like me because as long as I’ve had a credit card I have always paid the full amount of the credit card every month. I don’t think I’ve ever paid credit card interest in my life so I’m not a very good bank customer.
Ross: Well you’re not a very profitable bank customer.
Berni: Yeah. Okay tell me how do we start living within our means? What’s the mind set shift that we need to make in order to start living in the black rather than in the red?
Ross: Well I like to look at three concepts when we’re trying to live within our means. The three concepts would be cutting out which is:
- Cutting those things out that just need to stop in your life and there are those things in every one of our budgets or our expenditure.
- One other ways to cut back which is things that we can do less of and then there’s,
- cutting costs where things that you need but you can get it cheaper and these are three concepts we use when we look at our budget on how to live within our means.
Berni: Alright tell us through the three, cutting out first, give us an example.
Ross: Many of us may have phones, well we almost all have. The question is how many phones does one family need? And not only that but what sort of package are you on? We’re often on these packages where we have these great hand sets and phones, but really all we need is a phone. And so I would say these are things you could cut out.
Also things like our TV packages. There’s many things available but do we need that pay TV that’s a extra cost each month? Could be gym memberships we never use. Could be big ticket holidays that we go on. It all depends on what our means are.
Berni: We’re looking at stuff we’re spending money on it but lets be honest, given the constrain of our resources, we just don’t need to buy that stuff; it’s not worth the money that we’re paying for it.
Ross: Yeah and specifically if we’re struggling to balance our budget. These are things we need to look at that we can actually just totally cut out.
Berni: Okay, so things to cut out. You’ve got to be brutal with that don’t you? It’s a bit like cutting out a cancer. It’s like, “Oh I’ve had this gym membership, I might need it another time” or “I’ve had this pay TV package for such a long time, what if the kids were …” Hey, if you’re in the red something has to go.
Ross: If you’re in the red and you need to get fit buy a pair of joggers and run more! Do you know what I mean? There are things you can do which don’t need to be the more expensive way of doing it.
Berni: I love walking and I often think, “Gym membership?? Walking is free.”
Ross: Yep, there’s a lot of free things we can do actually.
Berni: Okay that’s cutting out. Tell me about cutting back, what’s that about?
Ross: Cutting back means you can still do things but maybe of a different standard or a different style. Say, socialising for instance. Some of us are more social than others, but how do we socialise? Do we go out to restaurants all the time? Or maybe we can just have people around for a barbeque more often. This can be a dramatic change to the way we spend our money. Even our holidays, you can cut your holidays out but why don’t you just do a different type of holiday instead? Maybe you are used to a overseas trip or a resort style holiday each year, what if you went camping? Now this is specifically for people who really need to make that change.
Berni: Can I tell you? When I moved from a commercial role into full time ministry obviously you lop a zero or two off your salary right? Two things I learnt, firstly there are lots of cheap eats around where we live. I actually don’t have to go to expensive restaurants. My wife and I can go out … in fact there’s one restaurant that makes a meal so big we share it between the two of us. So we walk out having spent a fraction of what we used to spend on dining. And the second thing is we used to go out and have breakfast almost every Saturday morning. Well now we often have breakfast at home and we’ll go out and have coffee.
Berni: It’s not a big sacrifice.
Ross: No and some people buy their lunch every day. You do that when you’re young I feel, but there comes a time when you think this is a lot of money every week that I spend, it could be like $40.00 a week just to buy your lunch.
Berni: Alright, cutting out, cutting back, what was the 3rd one?
Ross: Cutting costs. Now these are things we need, we just can’t cut them out. Just say your gas and electric. Okay you might be able to find a better deal. Phones as well.
Berni: Isn’t it amazing how often phone plans change and you look around and you think, “Well, what I was paying this much for I can actually now get that for half the amount.”
Ross: I did that the other week. I was with a company, I think I saved maybe $60.00 a month and got actually more than I had before just because I hadn’t looked at it for a long time and I was off contract. So just rechecking those things. Yes, we need to look at our mortgage/rent situation. Maybe you can get a cheaper mortgage, these days it’s very important. And just our shopping. We go to a different store now which is maybe a cut price store but we’ve found one where actually we really like the products they sell. They’re good standard but that’s different to what I was used to. We probably save around $3,500 a year, that’s a lot of money just for our regular weekly spend just by re-examining what it costs and doing it cheaper.
Berni: Okay, we’re almost out of time. Cutting out, cutting back, cutting costs.
Berni: Now tomorrow we’re going to be chatting about “Back to Cash”. Are you serious?
Ross: I’m very serious.