Advice is great, but it can help to see how it’s actually working out for someone and learn from their experience. It just might give you the extra push to put some of our tips into action. So, we asked BetterSaver staffer Rupak to give us the lowdown on how he maintains his frugal lifestyle.
This isn’t financial advice. It’s what works for Rupak. Just because it works for him doesn’t mean it will work for you. Everyone has their own specific situation and circumstances.
When Rupak first moved to New Zealand he only had $1000 in his bank account. With a whole lot of saving, budgeting and investing, Rupak has built his way into financial stability. Sure it took him 10 years, but he’s done it!
Rupak is now married, owns a home and has a baby on the way. When the baby comes along, they will be living on one income. We asked him to share how he makes it all work financially.
Here are 3 ways Rupak sorts out his finances
- Make extra mortgage repayments
- Cut back on expenses
- Investing instead of just saving
1. Extra Mortgage Repayments
First up, Rupak says the mortgage takes priority.
“I pay more than the minimum on mortgage repayments. If I have surplus money, I make extra payments. This means later on, when I go to the bank and set new terms and rates, I can pay less. The current low interest rates help as more of my payments go towards principal rather than interest.”
Rupak is right. Paying extra to your mortgage is a great strategy to enhance your financial well-being. Even relatively small increases in your mortgage repayments can take years off of your loan and save you thousands of dollars in monthly payments. The earlier in your loan you start making extra payments, the greater the benefits in long-term money savings. Use an extra mortgage repayment calculator to see just how much of a difference extra payments can make.
2. Cutting back on expenses
Next Rupak focuses on where he can save.
“My wife and I make a plan for cutting back on expenses, and we stick to it. OK, most of the time! There are three main areas that we do this.
“We share one car and I cycle to work whenever I can. I figure this saves about $2500 in vehicle expenses every year.
“I eat cheap - my standard lunch is a can of tuna and rice. It’s about $3.50 to $5.00 per meal. I could eat even cheaper, but the convenience of this lunch means it doesn’t take a lot of my time to prepare or plan for, and it’s nutritionally balanced.“The third area is clothing. We buy good, quality pieces that last longer. I maintain a capsule wardrobe with essentials.”
Rupak’s strategy focuses on three areas that can make a big impact on saving: transportation, food and clothing. Cutting expenses in these areas not only saves money but has additional benefits.
Cycling to work is cost-effective while also providing a bit of exercise and time to transition out of work mode before getting home. Packing your own lunch instead of getting takeaways adds up to big savings and can help you to eat healthier. And a capsule wardrobe that contains basic essentials that can be mixed and matched for any occasion and across seasons stops impulse shopping, keeps clothing purchases to a budget, and eliminates that eternal question of what to wear. It’s like a luxury version of Steve Jobs’ turtlenecks.
3. Investing instead of just saving
Before they got married, Rupak and his wife discussed their finances. It turned out that, like a lot of people, they had different views on saving and investing. Rupak wanted to invest most of their finances, while his wife was more comfortable with a savings account because it felt less risky. They came to a compromise on a strategy they were both comfortable with.
They put their money into separate personal investment accounts with diversified portfolios. They each invest the same amount of money, but each one chooses where to invest. That way, they both have input on how their money is invested and can choose their own comfortable risk levels. Plus, it makes it a bit of a competition to see whose investments perform better!
Rupak’s top tip?
“My top tip is to compromise when discussing finances with your partner.”
Right on, Rupak. And the earlier you have the money talk, the better. A recent study showed that money was a leading cause of divorce, second only to infidelity. Over 40% of Gen Xers say their divorce was due to money issues.
Get your finances sorted
What works for Rupak won’t work for everyone, and like we said, this isn’t financial advice. But we hope it gives you a little inspiration to put some savings tips into action in your own life.
If you’re struggling to save, we’re here to help. Getting your KiwiSaver sorted is the simplest way to start a regular saving habit, and because the money is invested on your behalf, your funds can grow substantially before you use them to buy a home or retire. We’ll help you look at your personal situation to decide which fund is best for you and how much you need to regularly contribute to meet your goals.
Our financial advisors are real humans who give you transparent explanations when it comes to your financial strategy. Try our fund finder quiz, or send us your questions or comments. We are here to help!