Scott Pape’s 13 top tips for saving money

As the cost of living crisis bites, there’s still almost always something you can do to transform your financial life. Here are 13 ways to get started.

The other day I was doing talkback radio, answering people’s money questions, when

Derrick from Pistnbroke, Victoria, called up and whined: “You can’t help me, I’m working three jobs, and I have no money left over at the end of the week!”

To which I replied:

“Three jobs! Have you ever sat down and done a budget to find out where your money is going?”

Derrick huffed, and he puffed, and then he squealed: “No! But it wouldn’t help! My problem is the cost of everything is too damned high!”

Now Derrick is known in the radio biz as a “dud caller”.

There is always something you can do.

In fact, I’m going to challenge myself to sit down right now and come up with 13 ideas that anyone can use this weekend to transform their financial life.

Here goes. …

Scott Pape wants Australians to take their finances into their own hands. Picture: Jason Edwards

TIP 1: Take the Barefoot Bucket Challenge

Could you live off 60 per cent of your take-home pay?

(I’m talking about the barest of necessities: the roof over your head, food in your belly,

utilities, petrol, school fees, and your phone.)

OK, so depending on your housing costs you may not be able to hit the 60 per cent mark – and that is totally okey dokye. This is not about subscribing to a cookie-cutter percentage but rather about being aware of how much it costs to keep the kids from drinking out of the dog bowl.

Where does the other 40 per cent go?

10 per cent Splurge: Blow 10 per cent on anything fun – shoes, booze, lattes. Set up an automatic transfer to a separate high-earning savings account. But when it’s gone, it’s gone!

10 per cent Smile: Save 10 per cent in an online savings account for big goals like a holiday, Invisalign, or a puppy. It’s called the “Smile” account because it makes you smile every time you think of it.

20 per cent Fire Extinguisher: This bucket is to put out financial fires, like crushing credit card debt, saving up for a house, or getting the banker off your back. Your Fire Extinguisher account will be used for different financial fires at different times in your life. (The 20 per cent amount doesn’t change, but what you use it for will.)

The bottom line: This exercise gives you an awesome overview of your current situation – and something to aim for.

TIP 2: Make a $42,622 phone call

If your home loan interest rate starts with a “7”, you’re getting robbed … and you need to switch.

I famously like cheap, no-frills, variable home loans … and, bizarrely, today some of the

cheapest deals on the market come via the back door of the big banks.

Both NAB and CommBank have povvo-Jetstar brands which undercut their main rates: NAB’s Ubank currently has a no-frills variable rate of 6.09 per cent, and Commbank’s Unloan is at 5.99 per cent.

However, let’s face it, when it comes to home loans, it’s still easier to bitch than to switch and for that, the scripts in my Barefoot Investor book work amazingly well (and for your negotiation use the rates above). If you only get around to doing one of these tips, make sure it’s this. On a fairly standard$450,000 mortgage, negotiating even a 0.5 per cent reduction is going to shave $42,622 off your 25-year loan. Totally worth it.

TIP 3: Give yourself a stress test

The banks periodically put all their home loans through what’s known as a “stress test”, to see the impact of higher interest rates. So find out what interest rate you’re paying and do your own stress test. Google “repayment calculator” and then work out what your repayments would be if interest rates go up half a per cent, 1 per cent … This might admittedly get you a little stressed, but that doesn’t mean it’s not a good thing to do. It pays to panic early.

Open your banking app and start scrolling through your transaction account.

TIP 4: Do some doom scrolling

Open your banking app and start scrolling through your transaction account. Look for some easy payment-pimples to pop: maybe it’s the monthly Netflix sub, or some random app you haven’t used in yonks. It’s so much more fulfilling than scrolling your ex on Facebook.

TIP 5: Bend over and touch your toes

Private health insurance is almost as painful as having haemorrhoids.

If you decide you still need it, the best-value policies are hospital only (consider ditching the extras) and silver- or bronze-rated cover (though admittedly this limits or totally excludes coverage for childbirth, knee or hip replacements, or mental illness).

The website I’m about to give you is the most underrated website since chestnutsaustralia.com.au.

I want you to head over to the government’s search engine privatehealth.gov.au, which lets you compare every policy on the market
(not just the ones that pay, like on
those other comparison sites). A few clicks can save you thousands of dollars
a year.

TIP 6: Rob your house

The difference in home and content policy prices from one insurer to another can be WILD.

These days I have most of my insurance with a broker (who manages all my claims – new

for old of course!), still each year I make him work for it, pushing him to get me a better deal.

If you don’t have a broker, you should shop around yourself, because you can almost always save money. Barefoot’s tip: If you have Mojo (and, as a Barefooter, you probably do!), you should consider increasing your excess to save money. The rule of thumb is that every $500 you agree to pay in the event of a claim will reduce your premium by 10 per cent.

TIP 7: Get some road rage with your car insurer

The same rules apply as for Tip 6. However, if you’re really struggling then consider basic third party, or third party fire and theft, which will cut your premiums substantially.

TIP 8: Own the cheapest car that your ego can afford

I can afford a very nice car, but I drive a Toyota ute. (Even better, Liz can’t drive a manual, so I never have to adjust the seat.) Still, the truth is that some of the biggest car accidents happen on the showroom floor.

This explains why most conversations I have with young people who are broke sound like a broken wheel: “Don’t drive a car worth more than your age!” (In other words, a 20-year-old can drive a perfectly safe $20,000 car … they don’t need to spend $40,000, even if the bank says they can.)

Ask for a raise this year.

TIP 9: Get a better card than ING

These days there are better online transaction accounts, with less
onerous conditions, and much better technology, than the little orange one (which for a time was my usual recommendation). A five-minute google will show you who the coolest card
in town is.

TIP 10: Make a good choice

It costs $7 a month (about $85 for the year), but my CHOICE subscription easily saves me 10 times that amount each year. They have 200+ different categories of independent expert reviews. I’ve actually been to CHOICE headquarters and seen how hardcore and in-depth they are at testing everything.

TIP 11. Triple M (Make More Money)

You need to ask for a raise this year.

Why? Well, if you don’t get at least a 5 per cent pay rise, you’ll be going backwards due to inflation. Think of inflation as like being stuck on a treadmill that keeps getting faster and faster. You have no choice but to keep running, otherwise you’ll faceplant and be ricocheted into the poorhouse.

So try the “Career Compounding Strategy” that I lay out in my Barefoot Investor book. It’s a three-step process: 1) look at your job from your boss’s perspective, 2) choose their three most important outcomes (not yours), and 3) write ambitious goals for how you are going to achieve them in the next 12 months and then share those goals with your boss and ask for regular feedback throughout the year. (For more info, borrow my book from the library.)

TIP 12: Talk to someone like me

If you’re really struggling with your debts, call the National Debt Helpline on 1800 007 007. They’ll put you in contact with an expert like me – a free, independent, not-for-profit financial counsellor. If you’re a struggling small business owner, call 1800 413 828 or visit sbdh.org.au

TIP 13: Spend up on something you love

Here’s the secret behind everything we’ve just spoken about: you should ruthlessly cut back on the things that you won’t miss (like switching car insurers – really, who cares). But here’s where the money-saving Nazis get it wrong – they tell you to cut back on absolutely everything, including the things you love. That’s why a big part of my Barefoot philosophy is to “live like a millionaire” by splurging on the things that do make you happy … whatever they are.

For me? The latest thing I bought that I love (other than my electric blanket) is something quite weird I call the Barefoot Bidet: it’s a Japanese dunny-lid from Kogan that sits atop my regular old bus. Get this: it comes with a remote and a heat warmer, and at the end it cleans both of us! So, what gives you the flush?