A friend recently asked me why it is that so many people (on good incomes) are struggling to save.
Often the big three money areas are housing, transport and food. In one sense these are necessary items. But what we spend on them is often way more than necessary.
I crunched some numbers on how much extra my wife and I could spend on these things - if for some reason we wanted to burn our money.
The high end of 2-bedroom apartments in our suburb is $305 per week more than our apartment. Not $305 per week. $305 per week more than ours is.
I cannot get over that. Sure it's new and modern-looking, but that's a lot of money.
It's an extra $15,860 per year above what we pay.
The average car in my city costs $271.87 per week to own and run. That's $14,137 per year.
A new restaurant near us is delicious and reasonably affordable. The cheapest entree is $10 and the most affordable main is $18.
Eating there every night would be $28 each. That's $196 per week (without any drinks) - or $10,192 per year. Each!
To be fair we would save a small amount on train and bus fares, and on groceries. Let's say $7,500. That still leaves an extra cost of $57,000 for this inflated lifestyle.
To have $57,000 to spend, after tax, a person would need to earn $74,100. That's a full-time wage.
So in a couple, one person would have to work full-time their whole life just to pay for the more expensive versions of these three things.
Someone once said "it is not so much the high cost-of-living, but the cost of high-living".
It's amazing how much we can save by choosing the slightly more basic version of things.
I'm just saying that if you're wondering where your money went - or how others survive while working far fewer hours (or on a much lower wage) this might be part of the answer.
PS. If you'd like to read more, why not subscribe to my monthly-ish catch-up email. All the new articles in one quick email.
Often the big three money areas are housing, transport and food. In one sense these are necessary items. But what we spend on them is often way more than necessary.
I crunched some numbers on how much extra my wife and I could spend on these things - if for some reason we wanted to burn our money.
1. Housing
Our apartment is fairly nice, but also cost-effective. I've mentioned how choosing it saves us $1,800 per year, compared to a similar one we saw.The high end of 2-bedroom apartments in our suburb is $305 per week more than our apartment. Not $305 per week. $305 per week more than ours is.
I cannot get over that. Sure it's new and modern-looking, but that's a lot of money.
It's an extra $15,860 per year above what we pay.
2. Transport
The Australian Automobile Association lists the costs of owning and running a car. It includes many often-overlooked costs like maintenance and depreciation (but not speeding or parking fines).The average car in my city costs $271.87 per week to own and run. That's $14,137 per year.
3. Eating out
We generally cook our own meals, but there are people who eat out daily. It might be home-delivered takeaway. It might be buying lunch and a few coffees during the work day. It might be a cafe-cooked breakfast on the weekend.A new restaurant near us is delicious and reasonably affordable. The cheapest entree is $10 and the most affordable main is $18.
Eating there every night would be $28 each. That's $196 per week (without any drinks) - or $10,192 per year. Each!
Adding it up
Hypothetically, we could live in a really flash place, own two cars (instead of zero) and each eat out once per day. And it would cost us an extra $64,518 per year.To be fair we would save a small amount on train and bus fares, and on groceries. Let's say $7,500. That still leaves an extra cost of $57,000 for this inflated lifestyle.
To have $57,000 to spend, after tax, a person would need to earn $74,100. That's a full-time wage.
So in a couple, one person would have to work full-time their whole life just to pay for the more expensive versions of these three things.
Someone once said "it is not so much the high cost-of-living, but the cost of high-living".
It's amazing how much we can save by choosing the slightly more basic version of things.
No offence
I'm not having a go at anyone who lives in a penthouse apartment, has multiple vehicles, or buys lunch and coffees. It's your life and your choice.I'm just saying that if you're wondering where your money went - or how others survive while working far fewer hours (or on a much lower wage) this might be part of the answer.
PS. If you'd like to read more, why not subscribe to my monthly-ish catch-up email. All the new articles in one quick email.
Great way to put money into perspective with folks. I read an interesting meme a few weeks ago which posed the question, "what does it take to waste $10,000/year?" with the answer being just $27/day. Such an easy amount of money to spend a day on unnecessary luxuries.
ReplyDeleteAbsolutely. And when there's several ways to waste $10,000 it really adds up. :)
Deleteabsolutely right
ReplyDeletenot to mention the cost of social life: when you meet with your friends in cafes /restaurants and it's lame not to drink and eat, when you go to the theatre twice a month to stay (or pretend to be) intellectual /or the cinema
also health - monthly pass for a gym can be a significant amount of money as well
Yes the gym can be expensive - especially when so many members don't actually go! :)
DeleteThere are cheaper/free alternatives to most things but it needs someone to have the initiative to suggest it. Meeting up with friends in each other's homes, exercising at the free outdoor gyms in the park (where available), riding a bike, and borrowing movies from the local library.
I think the challenge is advertising. Many dollars are spent to convince us that the above things aren't cool. Nonsense. When we invite friends to our house for a meal, they don't say "This is so lame, I'd much to prefer we all went to a restaurant."
(I'll stop before this comment becomes its own blogpost ;) but I think you get my point)