Any focus on long-term costs, such as education, can provide a ready opportunity to examine more routine expenses: including the dreaded household budget. And even the most modest savings achieved in this regard can help to top up a savings plan or mortgage repayments and produce long-term value for money. But it can be a difficult issue to tackle.
"The problem with discussing money with friends is that it's a bit like sex: you joke about it (or the lack of it), but you never go into the nitty-gritty, so you don't know how you compare," wrote one Family Money reader in a recent letter to Business This Week.
Her husband, she added, was repeatedly aghast at the amount of money she managed to get through: £270 per week combined with the children's allowance of £120 a month, with which she feeds, entertains and pays for the bulk of the family's clothing as well as petrol for her car and numerous handouts to the kids for extras at school, clubs, etc. Her household consists of two adults and four hungry young teenagers.
Food and clothing are undoubtedly two of the biggest expenditures for any family and when transport costs, entertainment and school expenses are taken into account it isn't surprising that there's not much left over in this case to divert into a savings account.
Household budgeting advice is available from a lot of sources: the credit union, An Post, the local community centre and even your bank (where budget-plan accounts are offered to spread your bills evenly over the year). A personal financial adviser can also review a family's total financial position and advise on the nitty-gritty of the household budget.
In this case, with four children who may or may not be on the verge of expensive third-level education, taking professional advice should probably be a priority anyway. An adviser may be able to find some extra cash from various sources: for example, is the family claiming all its deductions and allowances, including dental/medical?
An adviser would also review all the family's insurance and investment policies and its mortgage interest rate, perhaps suggesting a switch to a cheaper lender (keeping in mind any legal/administration charges).
Current savings would also be reviewed with the idea of improving on the deposit or investment rate.
Households full of teens do tend to use a lot of electricity, telephone time, heat and petrol (with mother as chauffeur), four areas where this family could make some savings. Ms Audrey Dixon is the spokesperson for Global Action Plan Ireland, an environmental lifestyles agency that is trying to recruit more Irish households to set up or join a local GAP group.
Part of an international network that started about 10 years ago, GAP "eco-teams" aim to reduce their consumption of natural and manmade resources and to become more aware of the significant savings that can result. Set up just three years ago, and working with a shoestring budget of £40,000 which pays 21/2 full-time salaries, GAP Ireland has brought nearly 300 families or community groups through its six-month training programme. Collectively, says Ms Dixon, this group has cut down on household waste by 26 per cent; water by 27 per cent, energy/utilities by 14 per cent, transport usage by 16 per cent and reduced their shopping trips by 16 per cent. Reducing household waste and water usage in Dublin doesn't have much of a monetary reward because rubbish collection and water isn't metered or charged for yet. But if the EU Commission has its way, water charges will probably be introduced within the next year, bringing us in line with most other European states.
If the same happens with rubbish collection, compost heaps and worm bins could become downright fashionable, suggests Ms Dixon. Savings are achieved quite simply, says Ms Dixon. "First you start with the external part of the house by checking windows, doors and the roof to make sure they are properly insulated. Check your lagging jackets and draw the curtains in the winter. Lights and appliances which aren't being used and which incorporate pilot lights in particular (such as the video, television, computer, central heating) should be switched off when not in use," she says.
Use energy-saving CFL bulbs. Turn the central heating down one or two degrees. Fill the kettle only to the level needed and match the element on the cooker with the size of the saucepan.
Getting everyone to keep a telephone log of outgoing calls and Internet use will focus a family on reducing the telephone bill while proper servicing of the car and keeping the tyres at the right pressure, as well as cutting down on unnecessary trips, will reduce transport costs.
The savings accrued in energy and transport management may be modest enough, but combined with any other reductions in tax, debt, insurance costs and the mortgage, and the overall amount could be even higher. Used to top up a savings plan, to clear a high-interest, running debt like a credit card or even to top up the monthly mortgage (in an effort to reduce future, compound interest payments) represents real long-term value.
Budgeting carefully especially on only one income is very important, but it can also be hit and miss since everyone's needs and wants are fluctuating. But getting all the family involved and fully aware of how much it really costs to run a household is half the battle in bringing costs under control.
Global Action Plan (GAP) can be reached at (01) 873 3993. Energy Awareness Week takes place this year from September 20th-26th. Sponsored by the ESB (and others) it is aimed, at helping households to cut their energy consumption and costs.
