I read some depressing statistics about cigarette smoking that revealed the poorer you are the more likely you are to smoke. Not only that, but smokers with lower income smoke more cigarettes per day than the average. In other words, those who can least afford to smoke are the people who smoke the most.¹

Why? There are several hypotheses in a study conducted by the World Bank on Poverty and Smoking² including the argument that poorer people tend to be less educated or that smoking is a form of self-medication against the stress of feeling deprived. However, the researchers conclude that none of the hypotheses are adequate at explaining the link between poverty and smoking.

With the link between being poor and smoking in mind, the next finding isn’t very surprising: the number one motivation for quitting is not for health reasons but for financial reasons.³ What is surprising however, is that poorer smokers are less likely to try to quit smoking that their wealthier neighbours.⁴

It’s a no-brainer that smoking is expensive. Your money literally goes up in smoke every time you light up. So how much does smoking cost the average smoker? I did some calculations based on some national averages.

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The last post showed the purge and splurge cycle that can often be the result of trying to reduce your expenses with budgeting. The troughs are the months when you’re determined to beat your budget; the peaks are the “I’ve given up, this is too hard” months.

Tracking your expenses is the first step to getting a handle on your spending habits. The second step is to reduce your spending foibles so that there is more money in the kitty for things that really matter to you. To do this you need a plan of attack.

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When it comes to budgeting and spending less, there are good months and there are bad. Some months you nail your budget or even exceed expectations, and others you will fall off the wagon. But if your aim is to reduce your expenses (or in the case below, a particular expense), what is the overall trend once the good months and bad are averaged out? When looking a a bunch of figures, it’s easy to get lost in the detail. This is where a graph can really help you understand your spending habits and whether you are achieving your goal of spending less.

We don’t have too many spending foibles, but our biggest one is takeaway food. We eat it as an “I couldn’t be bothered to cook” option, but really it is overprice, unsatisfying crap that is taking money away from things that we truly value or actually need. So it is our takeaway food expenditure that I’ve been looking at lately and I thought I would share the results to show how graphing your data can be quite revealing.

There is only one way to really get a hold of your finances, and that is to track your expenditure by writing down every cent spent and organising it into specific categories. Once you have written down all expenses for a month, you can then plot the total on a graph and get an immediate visual impression of your spending patterns and overall trend over time.

I’ve been keeping a budget for quite some time, so I have a fair bit of data to graph. I’ve kept a budget since 2005, but it was only since 2007 that I actually starting categorising our expenses more specifically. Below is a graph of our actual takeaway expenditure since the beginning of 2007 to the present day.

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We all want to pay less tax, so having a long list of work related tax deductions to claim is good right? Maybe.

When it comes to work related costs that are potentially tax deductible, the best scenario is one where your employer pays all or most of your work related costs. Why? Because even though these costs may be 100% tax deductible, that doesn’t equate to you getting 100% of the cost back. And after all, these expenses are incurred in employment, so the employer should be covering them (that’s the unionist in me talking).

Let’s work through an example to demonstrate.

Joe earned $45,000 this year. This puts him in the 30% income tax bracket. The following shows how much tax he will have to pay.

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It is not unusual in a marriage or relationship for one person to take on the responsibility of the household finances. The job of ensuring that the bills are paid on time, that the savings account grows and debt is paid off more often than not falls on the shoulders of one person, while the other is blissfully unaware. While this can be convenient it can also be problematic as I have recently discovered.

Despite the fact that I take care of all aspects of our household budget, I assumed that DH also knew about the important aspects of our finances. I was wrong.

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I have put together a collection of Australian online resources for managing money. There is a wealth of information (pardon the pun) between these websites: everything from financial counselling, budgeting and saving, to financial planners and investing in the share market.

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You’re busy saving for that holiday at the end of the year. But there’s also the emergency fund that needs boosting, you need to save for the car insurance, your Christmas fund, a house deposit…

How do you manage multiple savings goals?

I wrote previously about using excel to track your savings goals. This is a great method for monitoring your savings progress, but how do you divvy up the limited amount of cash that you have to put towards all these savings goals?

In order to manage multiple savings goals, we can borrow from the snowballing debt concept to streamline our cash. Here’s how it works.

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Getting by on an irregular income is all about managing cash flow. When the cash flows in, you need to manage it in a way that there is enough to cover the months when the cash isn’t flowing in so freely.

When I worked in an accounting firm, I often worked with farmers on their cash flow budgets. If anyone has irregular income, it’s a farmer. Keeping a cash flow budget is one way to keep track of whether you are able to meet current and future expenses regardless of whether your income is stable or fluctuates wildly.

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Depending on your spending habits, you can significantly increase your savings by having a regular no spend day. For some people this may seem easy, in fact you may have several no spend days each week. But if you’re in the habit of letting small amounts slip out of your wallet each day, then consciously having a no spend day will not only save you money, it can be an eye opener to your spending habits.

I’ve written previously about tracking your spending and keeping a budget, but using a monthly budget doesn’t give a picture of daily expenditure. If you’re not sure how much money you actually spend each day (and on what) it can be helpful to add up each day’s expenditure and write it down on a calendar. Not only will you get an idea of how much you spend each day and how many no spend days you have, but how much you could save by having a no spend day each week.

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Photo by M.V. Jantzen

Building savings can be a slow and steady game. You set your savings goals, decide how much you want to put towards your savings each pay day and set your savings on autopilot by automatically deducting a set amount. And then you wait.

However, on top of the usual automated savings plan, there are a few things that you can do to give your savings account (and your motivation) a quick boost.

1. Change to a high interest savings account

Maximise your savings by getting the highest return possible. While it may not seem like much, a higher interest rate will compound, giving your overall savings plan a boost over time.

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