Getting ahead financially: Household financial waste
- Posted by Palladium Wealth Partners
- On December 6, 2019
- 0 Comments
Unnecessary and avoidable household financial waste can be costly; placing pressure on your cashflow, locking away potential surplus income, and prolonging the achievement of your financial goals and objectives.
For example, in our video, ‘Business and household food waste’, we touched on the impact that food waste can have on your household finances; a household’s annual food waste bill is $1,645.64 on average.
Whilst this may not seem like much money to some of us, it’s important to remember this is an expense, which, if left unresolved, can be quite impactful over time – especially when considering opportunity cost.
This unnecessary and avoidable expense (like many others) can be eliminated in full, or at least in part, by taking a proactive approach; recognising and dealing with the relevant issues at hand on an ongoing basis.
Once this expense has been resolved, the resultant surplus income that has been unlocked can then be directed towards beneficial focuses, such as paying down debt or saving and investing for the future.
Household financial waste
According to a recent report*, the collective financial waste of Australian households, when looking at several key areas, totals roughly $18.9 billion per annum. The key areas identified are:
- food waste ($9.1 billion per annum),
- home loan waste ($4.2 billion per annum),
- credit card waste ($621 million per annum),
- unused gift cards ($332 million per annum),
- standby energy usage ($1 billion per annum),
- exception bank fees ($551 million per annum),
- unused gym memberships ($1.8 billion per annum),
- unused roadside assistance ($400 million per annum),
- unused and unreturned clothing ($930 million per annum).
Whilst the above is not a complete list, it does serve to highlight something important.
Food waste is only one area of household financial waste. And, if it exists in a household then rarely does it exist alone; often it can be a part of a much larger aggregation of household financial wastes.
Home loan waste
When looking at the second biggest household financial waste, home loan waste, the $4.2 billion per annum relates to unnecessary home loan interest paid by existing borrowers. What is meant by unnecessary interest?
Here is a summarised excerpt (and supporting table) from a recent report^ by the Australian Competition & Consumer Commission (ACCC), which relates to standard variable rate residential mortgages:
‘Lenders appear to be offering significant discounts to new customers with the result that new borrowers are paying lower interest rates on average than existing borrowers at the same lender. It suggests that many existing borrowers might achieve significant savings by regularly reviewing the interest rates they are paying, asking their lender for a better rate, switching to a cheaper product at the same lender or switching lenders to take up the best available offers.’