S1: Hello and welcome to It all adds up. The podcast
S1: where we chat about money, how to get it, how
S1: to spend it, and how to invest it. I'm money
S1: editor at the Sydney Morning Herald and The Age newspaper's
S1: Dom Powell.
S2: And I'm Jess Irvine, a senior economics writer at the
S2: same paper's Look Dom, it's been a massive week in
S2: personal finance, with interest rates still on the rise. Meanwhile,
S2: we just know the cost of living is biting across
S2: everything really from food to rent to toilet paper. Actually,
S2: I'm not sure about toilet paper. I did that actually
S2: get more expensive during COVID? It definitely got more expensive.
S1: We just had less of it. So, I mean, it
S1: was expensive. If you're buying from the guy on Facebook
S1: marketplace who was hoarding rolls, who.
S2: Was charging $100, I never.
S1: Got to that point, which I'm honestly sad about because
S1: I think that would have been that would have been
S1: fun to have to do that. But yes, you know,
S1: things are expensive. Things have been expensive for a while now.
S1: We know this regular listeners of the pod will know
S1: that that the cost of living has been has been
S1: pretty grim. And so we're continuing our series, our six
S1: part series, looking at real life budgets with real life
S1: people and real life problems and how people are tackling
S1: the rising cost of living. And this week's question comes
S1: from our listener, Tony, who wants to know how he
S1: and his family can save on some of their bigger
S1: bills and cut some costs out of their household budget.
S1: So let's have a listen, Jess.
S3: Hi, Jess and Dom. It's Tony from Melbourne. I work
S3: full time and live with my wife and two kids
S3: aged 12 and eight. We find insurance is one of
S3: our biggest costs. We spent about 3500 a year on
S3: car insurance for our two cars. I drive to work
S3: in the city and my wife drives to park more,
S3: both from Berwick. Our petrol and tolls add up to
S3: about $1,300 a month. We spent about $2,000 on food,
S3: which includes groceries and everything to do with Coles and Woolworths,
S3: including eating out. I would appreciate any tips you have
S3: on how we could save. Thank you.
S1: Radio So Tony's highlighted sort of two pretty major costs
S1: for his family here, which is insurance and food. So
S1: I suppose let's start with insurance. Jess, what are you
S1: what do you reckon?
S2: Yeah, I was really gobsmacked by Tony's car insurance because
S2: I think I pay about $500 for comprehensive insurance on
S2: that's cheapest chips.
S1: I'm at like chips. I'm at like a grand for mine.
S2: Well, this is fantastic because I can share with you
S2: how I managed to do this. I did check in
S2: with Tony and he is driving sort of some higher
S2: value cars. So I think that has an impact because
S2: you have to insure them for a higher amount. The
S2: premiums are higher. And I did try to sort of
S2: jump on some websites. I was like, I'm going to
S2: save Tony some cash. And I was jumping on lots
S2: of different insurance websites and I remembered how horrible it
S2: is to have to go through shopping around your insurance.
S2: And then I gave up. So, Tony, I'm sorry, I
S2: haven't actually got you an improvement on your current premiums.
S2: But just to empathise with everybody shopping, your insurance is
S2: not like the super sexiest thing you're ever going to do.
S2: It's not the most exciting. But unfortunately, we have to
S2: let people know that it is actually a massive way
S2: to save money. So shopping around and not just letting
S2: your car insurance in particular auto renew, because one of
S2: the things we know with insurance is that if you
S2: just auto renew every year, the insurers have differentiated pricing
S2: so that you actually pay what we call a loyalty tax,
S2: that if you don't present yourself and say, I want
S2: a better deal, they will slowly ratchet up your premiums
S2: compared to what they offer to new customers. So I'm
S2: not actually sure if Tony has done this, but he should.
S2: At least there's a thing you can do called mystery
S2: shopping where you just go on your insurer's website and go, Yes,
S2: I'd like a quote. Here is some information it asks
S2: you for your address. So I'm not sure if it
S2: has a way of knowing, Hey, wait a minute, you're
S2: already a customer. But see what the quote that it
S2: generates for you and that's something everyone can do is
S2: just sort of shadow shop.
S1: I think shopping around is definitely something that everyone should do, though.
S1: I think in my own personal experience, shopping around has
S1: only ever made my insurance more expensive. Oh, and I
S1: have no idea why this is. Maybe it was just
S1: because I got in at a good time and I'm
S1: sitting on like quite, quite a good deal. But every
S1: single time I try and look for for other other
S1: car insurance, it's at least a few hundred dollars more.
S1: No matter where I go, even if I go to
S1: my same insurer at the moment. So I think it
S1: can be a bit of a mixed bag sometimes. So
S1: sometimes you just got in at a sweet spot that
S1: maybe that is the best price you're going to get.
S2: Well, it can depend and it depends on like where
S2: you housing garage, the car, how many kilometers you drive.
S2: And so each insurer has their own little intricate system.
S2: So maybe you're getting stung by, you know, just some
S2: sort of finer detail. And look, just to join the
S2: chorus of don't actually shop around if you're using some
S2: of the comparison websites like compare the market finder not
S2: to sort of penalise any of them in particular, I
S2: have found with some of those sites, you want to
S2: get a quote, you're like, Sure, show me the prices.
S2: And they're like, Sure, give me your email and your
S2: mobile phone number and I will call you for the
S2: next five weeks trying to get you to take up
S2: a new policy. So you do sort of expose yourself
S2: to quite a lot of cold calling with some of
S2: those websites, not necessarily the ones I've just named. But
S2: having said that, in theory, if you are just auto
S2: renewing every year, you are going to get stung. So
S2: it is a good time to shop around just to
S2: get that competitive force working for you and becoming a
S2: new customer, which we know is just the basic level
S2: of the basic rule of finance, is to to shop around.
S1: But I suppose like outside of like shopping around, there
S1: are other ways that you can save, right? Like you
S1: can't you don't just have to jump ship from insurance
S1: company to insurance company every year.
S2: Yeah. So one of the best ways to sort of
S2: see whether you're actually getting value for money on the
S2: insurance that you have is actually to review the coverage
S2: that you have. So we're moving into territory now, which
S2: is not just I'm going to get something cheap, the
S2: same thing cheaper, which is shopping around, but actually looking
S2: at scaling back some of the insurance that you have.
S2: So a lot of people are underinsured. I think a
S2: lot of people are also over insured in that they're
S2: sort of paying for these top level comprehensive bells and
S2: whistles policy. Seas insured for all the things and with
S2: the lowest possible excess, because I think that's the right
S2: thing to do. And, you know, that can be a
S2: good decision for you. But if you are, for instance,
S2: and I don't think Tony's actually in this particular situation,
S2: but like with interest rates going up, if you're looking
S2: at all your insurance premiums and just going, this doesn't
S2: add up, there are ways to reduce your premiums, which
S2: do involve a trade off for slightly less coverage than
S2: you're getting. But the first one is just review your excesses.
S2: So if you accept a higher excess, which is the
S2: amount that you agree to pay in the event that
S2: you're in a prang and you have to actually, you know,
S2: make a claim, you're like going to pay $500 out
S2: of pocket or it's $1,000 out of pocket. If you
S2: agree to a higher excess, that's going to reduce your
S2: ongoing premiums. And so, you know, that could turn out
S2: really bad for you if you just drove into something
S2: the next day and then you're going to pay $1,000,
S2: not 500 out of pocket, to get the work done
S2: to your car or, you know, you could be saving,
S2: I don't know, like a couple of hundred dollars every year,
S2: you know, do that for a couple of years. And
S2: then you've you've saved as much as you would have
S2: to pay extra out of pocket. And so you're ahead
S2: on the deal. So one of the reasons why my
S2: car insurance is so cheap at like 500 is I've
S2: actually got a pretty low level of insurance and I
S2: think I've agreed to an excess, which is something like
S2: $2,000 or something. That's because I know that I've got
S2: a significant bank of savings. Hey, I'm not rolling in it.
S2: But sorry, I've, I've got an.
S1: Address is completely just as loaded.
S2: I'm loaded. I've got an emergency fund which is fully
S2: funded to sort of 3 to 6 months of living expenses.
S2: So I know that if I do have to incur
S2: that excess, it's not going to ruin me. And they
S2: sort of say insure for against things that are going
S2: to ruin you.
S1: And I suppose like it's almost like a little game, right?
S1: Like if you've got a really high excess, it's like,
S1: you know, the longer I can go without having a
S1: car accident, the better value for money. I'm getting here. Yeah.
S2: And it was like it was hundreds of dollars off
S2: my annual premium to do that. So I'm a bit
S2: of a gambler, as it turns out. I've got a
S2: pretty high risk tolerance and I'm in a position to
S2: be able to to play with that sort of thing.
S2: So I mean, otherwise to save. So look at your
S2: sum insured. So there's two different car insurance policies on
S2: comprehensive anyway. You can do either a market value, so
S2: you write off your car and the insurer says, great,
S2: we will pay you out the sum that is equivalent
S2: to the market value of your car at the time
S2: of your crash. Or you can agree to an agreed
S2: value policy. So so you can there's a minimum that
S2: they'll let you do. But like with my car, it's
S2: probably worth about 20 grand second hand. I think I've
S2: got it set so that I've agreed that I'll get
S2: a payout of like ten grand or 12 grand total
S2: if I totally. So that won't buy me my same
S2: car on the open market, but it'll buy me a car,
S2: you know, like I'll, you know, it's not going to
S2: replace my car, but I'm just accepting that if I
S2: do have this terrible accident, that's going to be a
S2: lot of going on in my life. And one of
S2: the things is that I'm going to have to drive
S2: a not as nice car. And of all the potential
S2: things that are probably going on at that time, that
S2: might be the least of my worries. Although for some
S2: people you really want to know that you're covered to
S2: get the same car again. But however, I saved like
S2: hundreds of dollars a year on my premium just by
S2: agreeing to that lower amount. So but essentially you're getting less,
S2: but you're paying less as well.
S1: The I guess, radical option if you are looking on
S1: ways to save on your car insurance, which is this
S1: is especially relevant, I think, for people who have two cars,
S1: especially if you have two nice cars, which a lot
S1: of people do. Um, obviously car insurance is more expensive
S1: on nicer cars and higher value cars. So what you
S1: could do if you've got a car that you don't
S1: drive as much or you use it for like shopping
S1: trips or, you know, taking the kids to, to soccer
S1: or something like that, you could sell it on the
S1: used car market, which is booming at the moment and
S1: has been booming for a few years. And by something that's.
S1: Less good, you'll save an insurance, you pocket a bit
S1: of extra cash. And if all you really need is
S1: just a functional car, you can pick up something that's
S1: that's not quite as expensive. So that's I mean, that's
S1: obviously that's a big decision, but it's definitely something you
S1: could do and it will save you money in sort
S1: of a number of different ways.
S2: Yeah, that's lateral thinking because it just it unlocks some equity.
S2: You know, you've got an asset that is not liquid
S2: and you can sell it and buy something cheaper and
S2: you've freed up some cash if you're in that situation,
S2: that you really need it. One last thing to consider
S2: on car insurance is the type of insurance that you get.
S2: So many people think you can only get comprehensive if
S2: you want to be good and be properly covered. But
S2: lots of people choose to take out a lower level policy.
S2: So we know that through our ktp slips, everyone is covered.
S2: You're forced to get that through your RJO in some
S2: states or you pay for it separately. In other states.
S2: That's going to cover you for medical bills. If you
S2: hit another person or you get injured, you personally, you
S2: know the people are damaged. If there's property damage in
S2: a car crash, your comprehensive cover will cover your car
S2: as well. If you know if for any damage, you
S2: can get lower levels of policy, which are called third
S2: party property damage, which doesn't cover your car. So you
S2: have to cover the cost of your car and fixing it.
S2: But it does cover you if you hit the porch
S2: or you hit the very expensive car and suddenly they're saying, hey,
S2: that's going to cost 100 grand to fix or whatever.
S2: So again, it's substituting for a lower level of insurance.
S2: But again, if it's really if you're in a tight situation,
S2: that's something to consider, that there are different levels of
S2: car insurance as well. And there's another one called Third
S2: Party Fire and Theft, which covers you if you hit
S2: the other person and if your car is in a
S2: fire or is stolen. So but doesn't cover you for
S2: damage to your car if you're in an accident. So insurance, hey,
S2: the wonderful world of insurance. I think it's not something
S2: anybody wants to have to think about, but we're the
S2: cost of living as it is. These are the big bills.
S2: These can add up to hundreds, if not thousands of
S2: dollars and is something that is worth spending a little
S2: bit of time investigating. What coverage you have and what
S2: coverage you need.
S1: Yeah. And I think just to sort of round off
S1: the car chat, I think Pony also mentioned that, you know,
S1: petrol is another expense, petrol sort of one of those
S1: sort of unavoidable expenses, right? Like, you know, it's always
S1: going to be expensive. We're never going to be happy
S1: about the amount of money we spend on petrol. Like
S1: it's never good. Obviously, you know, the, the common sort
S1: of thing is to shop around, get one of those
S1: apps that let you look at all the prices nearby
S1: you and make sure you're always getting the cheapest price
S1: unless you want to buy an electric car always an
S1: option you know could be there available these days if
S1: you want to save money on petrol, obviously that is
S1: an extreme choice. But you know, if you could do it,
S1: that would be a way to save money on petrol.
S2: Well, that's true. What's the best app in Victoria? I'm
S2: in New South Wales and Fuel check is the one
S2: you want to download. Yeah, the one Victoria.
S1: One I use is Petrol Spy. So the other thing
S1: that Tony mentions in his, in his message is that
S1: he spends around $2,000 a month ah for food for
S1: him and his family and I think that's, that seems
S1: like quite a significant amount of money. And he mentioned
S1: that this also covers, you know, all his grocery shopping
S1: and then eating out takeaway, all that sort of stuff.
S1: So yeah, food's again, one of those things is a
S1: bit like petrol, like you're always going to spend money
S1: on it. You're never going to be super happy about
S1: the amount of money you spend on it. But I
S1: think there are a few things you can do just
S1: to sort of cut those costs a little bit.
S2: Yeah, I've been tracking my food spending for a couple
S2: of years now and I think I average I was
S2: averaging about $450 per month to feed myself and my
S2: eight year old for he's with me half of the week.
S2: I think that has crept up though. More recently. I'm
S2: heading sort of 550. I had a $600 month, so
S2: I can definitely feel those rising prices at the grocery store.
S2: That is not a beat up. Those prices are really,
S2: really noticeable. So the eating out as well can get
S2: a little bit out of control, particularly if you're a
S2: busy family. I added up. I spent about $650 last
S2: month on like Uber Eats, eating out and restaurants. It
S2: was a bit of a YOLO kind of month. I'm
S2: I'm still YOLO going away until I'm still on my
S2: fixed low rate mortgage and I feel like it's coming.
S2: It's coming, but I haven't quite adjusted the spending yet,
S2: which is probably means it's my fault. Interest rates are
S2: still going up because the Reserve Bank is like, stop spending.
S2: And I'm like, Yeah, but not on eating out anyway.
S1: Stop spending. But not you, Jess. Not yet.
S2: So but this month we. I have got the sun
S2: on board. We're going to do a little experiment and
S2: it's no eating out March. And I introduced this concept
S2: to my son, and I said, I'll give you 20
S2: bucks if you just agree to this and get on
S2: board and don't whinge about it because kids whinge a
S2: lot and they're like, I want to have Macca's, I
S2: want to have pizza. And I've also promised him that
S2: I will start preparing like the meals that he loves.
S2: We order sushi on Uber, eats for an easy meal
S2: at night when I couldn't be bothered. So I've been making.
S2: We made sushi rolls on the weekend and they had it.
S1: How did that go? I think they're famously really easy
S1: to make.
S2: They were really bad, I think. My rice was like glue.
S2: It was like stuck together. And I think maybe I
S2: didn't rinse it well enough before I boiled it or something.
S1: Starchy. And you got to. Yeah.
S2: And you really want to wait until they're totally cold
S2: to serve because it was just a little bit warm
S2: and also crunchy and also glug. And we were not
S2: we were not sold on that one, but it was
S2: significantly cheaper. I also did prepare a mac, a fake
S2: McDonald's Happy Meal for my son. So I like I
S2: bought the mince, I mixed it with an egg. I
S2: made it into little patties. I had some brioche buns
S2: and I had the cheese slices and tomatoes. So I
S2: made the hamburger. We had the frozen chips and I
S2: also bought like sugar free coke from from the shops.
S2: And I spent the whole morning cooking this for lunch.
S2: And I added it up that it costs about like
S2: it cost me like $5 to make the meal. And
S2: a Happy Meal is only about $6 anyway. I think.
S1: So if you're going to try and fight for like,
S1: you know, cost plus price against Macca's, you're never going
S1: to win.
S2: No, I think they have like a significant economies of
S2: scale situation going on. So, you know, the advice is
S2: always to cut your food bills, cook everything at home.
S2: It's not always the case, although I think on average,
S2: you know, if you're not paying for the restaurants rent,
S2: labor costs, you know, tax overheads, whatever, you know, you're
S2: just buying the raw ingredients and cooking it at home,
S2: you know, And if you don't have anything better that
S2: you could be doing with your life than spending the
S2: whole morning cooking your fake McDonald's meals, it's either it's
S2: an option that's not a great example, but I do
S2: think it still holds that buying the fresh ingredients and
S2: preparing them at home is where you want to be aiming.
S1: One of my favorite things to do, and for context,
S1: I would say that I probably spend around $400 ish
S1: a month on food as just a single single guy
S1: living alone. That includes, you know, eating out. And, you know,
S1: Uber eats and all that.
S2: Sort of stuff. That's pretty good if it does include
S2: all those things as well.
S1: Yeah, I'm a big fan of sort of like the
S1: freezer meals and you get you buy like go to
S1: the Asian grocer and you get the big pack of like,
S1: you know, pork dumplings or something. You throw them in
S1: the freezer on the way home, you grab some Asian
S1: greens and you put it all on the on the steamer.
S1: And it's super simple, super easy. Like it's, you know,
S1: if you break it down, it's very cost effective as well.
S1: So like that's a way that you can sort of,
S1: I guess, you know, some low cost meals that aren't
S1: sort of super difficult. And I also think that like
S1: one of the things that I've sort of come around
S1: to recently, which I think is a real sort of,
S1: you know, me sort of finally saying goodbye to my
S1: youth is, you know, getting really on board with supermarket
S1: loyalty schemes. Yeah. You all started you all this is it.
S1: This is it. This is the beginning of the end.
S1: But like.
S2: You'll be reading things like, I now read things and
S2: I sort of hold them out a little bit further
S2: from my face that.
S1: I've started saying like, oh, as I got up from
S1: the couch. So like, you know, that's it. Yes. Audible groans. Oh, no.
S1: But the one of the things that you sort of
S1: begin to realize that if you do all your shopping
S1: at just one supermarket, right, like just a Coles, just
S1: a Woolies and we show we had any others that
S1: were worth mentioning, obviously Aldi, but they don't have a
S1: loyalty scheme that you. We'll get like a sort of
S1: really outsized rewards in terms of the amount of points
S1: you get back Those points convert into dollars. You know,
S1: you can save a bunch of money. So in Tony's
S1: message to us, he mentions that, you know, Coles and Woolworths,
S1: which implies that his family shops across both. So if
S1: you've got a $2,000 a month spend on on food,
S1: you know, I would say at least 1500 of that
S1: or maybe a thousand of that is going to be groceries.
S1: If you shop just at one of those supermarkets and
S1: redeem your loyalty every single time, you're going to start
S1: seeing some savings there. So that would be something else.
S1: I would say just sort of really sort of focus
S1: your spending and then maybe supplemented with something like an
S1: Aldi shop, right? Like get all your basics at Aldi
S1: and then get everything else you don't like. All the
S1: specialty sort of items from from a Coles and Woolworths.
S1: I think that's a great way to sort of, you know,
S1: just trim a bit of fat around the edges and
S1: get get some reward for it when it comes to
S1: your weekly shop. Yeah.
S2: And a specific program I think is worth mentioning, although
S2: it's not an endorsement of Woolworths, but Woolworths does have
S2: an everyday extras program which you pay $59 per year
S2: to subscribe to it, but it entitles you to 10%
S2: off one shop every month. So you know, if you
S2: do so I have now started, I will do that
S2: as my first shop of the month, we tick over
S2: to 1st March, whatever it is, and I'll jump on.
S2: I also shop now online because I find that that
S2: avoids the temptation of just throwing everything that I see
S2: into the basket and I can be really strategic and
S2: the websites will let you order your search for something
S2: and then search for it by unit price listed the
S2: cheapest listed at the top. So it'll show you the
S2: home brands first and you can still scroll down and
S2: get your more expensive brands, but it's just a little
S2: prompt to go, Well, maybe I can just go for
S2: the cheaper home brand. So I'm finding shopping online very
S2: effective and then I try to buy as much as
S2: I can in that one big shop at the start
S2: of the month, get the 10% off. I sort of
S2: did a $300 shop, get the $30 off, which is
S2: nothing to sniff at, which was stuff I was going
S2: to buy anyway. And you can do that every month.
S2: So in about two months I already made back the
S2: cost of the program. So and then for the rest
S2: of the ten months, you're into discount territory. So pretty
S2: good everyday extras.
S1: Absolutely. And those, you know, especially if they're freshly launched,
S1: they will do anything to get new customers in. So
S1: sometimes you can make big old, big savings.
S2: And looking out for just the 50% things that are off.
S2: You can also on the websites, Coles and Woolies, you know,
S2: shop the specials.
S1: Absolutely. So hopefully there's some practical tips in there for
S1: our listeners and for Tony as well. You know, if
S1: you're thinking about your insurance, make sure you review your
S1: excesses and look at what your insurance is covering you for.
S1: You know, there's a ways to sort of cut down
S1: some costs there. Yes.
S2: And I still think it is worth shopping around the
S2: insurance policies, as boring as that may be. Just set
S2: aside half an hour on a weekend to hit up
S2: some websites and see what else is out there for
S2: your car and home insurance. The same sort of rules
S2: apply for home insurance of reviewing your coverage and your
S2: excesses and shopping around. Yeah, and food. You know, I
S2: feel like that's a it's hard. We have to eat, Tom.
S2: Everybody has got to eat. So, you know, it is
S2: hard to have to see those prices going up all
S2: the time. I think the message from the Reserve Bank
S2: is very strongly stop eating out, stay at home, eat
S2: your baked beans, don't have your Shiraz and your Wagyu, which.
S1: Was I mean, I was never having Shiraz and Wagyu
S1: in the first place.
S2: Either. You got to have mints and tap water only
S2: these days and hopefully Aldi wine.
S1: Yeah.
S2: So that's an Aldi wine is actually really good. Yeah,
S2: I will say that it's actually worth a try. So yeah,
S2: I think it's the spirit of the times and we
S2: can all sort of tighten the belts a little bit
S2: and hopefully that will be enough to sort of, you know,
S2: the whole point is that we were going to the
S2: shops too much and paying too much and not sort
S2: of complaining about the prices. And so the shops are
S2: able to put the prices up. There needs to be
S2: some sort of push back. And we are supposed to
S2: be being more cautious and being more discerning in what
S2: we pay for things. So if you're feeling that pressure,
S2: you're definitely not alone. There's definitely pressure there.
S1: Absolutely. But yes, hopefully some of these things help you and,
S1: you know, join us next week for the final episode
S1: in our six part series of everyday budgets. Still send
S1: them in. We're still we're still keen to to, you know,
S1: hear from you guys always it it all adds up
S1: at Nine.com.au. But as always, thanks for listening.
S2: See you next week.
S1: This episode of It All Adds Up was produced by
S1: Chai Wang. The information discussed is general in nature and
S1: does not take into account your personal financial situation, goals
S1: or objectives. You should always do your own research or
S1: get professional advice before making any major financial decisions. If
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S1: You can also submit your listener questions in text or
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S1: for listening.