BEN HARVEY: If we’re serious about the cost of living, we need to stop spending money on crap we don’t need

Another day, another headline about the cost-of-living crisis.

The humble chook’s in the frame at the moment.

“Chicken giant Inghams says more customers dining at home amid cost-of-living crunch,” was one headline this week.

“KFC chain owner Collins Foods warns on profit,” was another.

News that tight budgets are changing the way we consume poultry came hot on the heels of warnings that we’re going to retire broke.

“The cost of a comfortable retirement has surged,” was the alarming warning in the national press a few days ago.

The Association of Superannuation Funds of Australia had calculated that a couple wanting to retire “comfortably” requires $73,337 a year.

That’s up by close to 20 per cent since we first heard about a city in China called Wuhan.

I don’t exactly know what constitutes “comfort” but assume it is the lifestyle enjoyed by the people you see in ads for retirement villages and companies selling annuities.

You know the ones. He looks like George Clooney, she looks like a pepper-and-salt-headed Farrah Fawcett and they’re both walking a golden retriever along the beach as the sun goes down.

With the youngest of the baby boomers about to retire, Australia needs to have a grownup conversation about our finances.

The first step iS calling out the cost-of-living crisis for what it really is — a cost-of-crap crisis.

Most of us have got enough money to get by; we’ve just forgotten how to stop spending it on crap we don’t need. Like takeaway hot n’ spicy tenderloins.

I’m not suggesting we all start living like we’re Amish, rearing chickens in barns we built ourselves, I’m just saying we buy a lot of garbage that we could do without.

Question: Ever get to the end of the week wondering why there’s no money left in the transaction account?

Answer: Crap you don’t need.

It’s boring advice but if you spend $1.01 for every $1 you earn then there is no financial planning kung fu that will save you. Spend 99c for every $1 you’re paid and life will work out pretty well.

The magic of compound interest makes that 2c spending difference quite a financial force over the course of a lifetime.

How do you stop spending money on crap you don’t need? By identifying the crap you need.

To do that you need to work out how much it costs to run your household, and your life, each year.

Not just the home loan and essential utilities like water, gas and electricity, I mean every cost.

Write them all down along with the average annual cost of each and you will be amazed at the length of the list.

If you don’t spend more than what’s in the account the balance of your pay goes into then you will live a happy life filled with fried chicken.

School fees, health insurance, pet insurance, car insurance, life insurance, house and contents insurance car registration, driver’s licence, council rates, phone, internet.

Own a boat? Put the rego and skipper’s ticket on the list. If you go fishing from that boat then add your recreational angling licence.

Remember we are talking about noting every single bill you know you will be hit with so be honest.

You know you need to service the boat once a year and the car twice a year, so put estimates of those costs down as well.

Once you’ve compiled the full list you will likely need a stiff drink.

The annual bill will likely be far bigger than you realise. Here’s a handy financial hack to get on top of the relentless outgoings.

The journey to financial clarity starts with a move every financial planner will tell you to avoid: applying for a new credit card.

If you are an average household you need to get one that has about a $2000 limit. This is your float.

Once it and the pin number arrive in the mail, jot down the number on the front, the expiry date and the verification number on the back.

Put this information somewhere safe and then destroy the card.

The reason? So you are unable to carry it around and buy crap you don’t need. To that end make sure it isn’t live on your banking app.

This is for payment of household bills and that’s it. Nothing else. Not clothes. Not holidays to Bali. It will be the most boring thing you ever own.

The last thing to do is divide the annual household bill total by the frequency of your pay. If, like me, you get paid weekly, then divide by 52. If your wage comes monthly, then divide by 12.

The figure you have calculated is the amount you need to excise from each pay packet in order to meet your household commitments over a full year.

Last step is to contact the issuer of each bill and set up an automatic deduction from the card you recently destroyed.

Most companies and government departments offer a direct deduction option. For those that don’t you may have to pay by phone or online as they fall due.

If you perform all these steps then you will never have to worry about having enough cash to cover the power bill again.

If you check on your balance you will notice it will go in and out of the red according to when the bills arrive.

Sometimes you will go a few pay packets without having an automatic deduction withdraw funds and you will generate a healthy little surplus.

When this happens don’t go out and buy something because as sure as night follows day a blizzard of invoices will soon drive your statement into the red.

It shouldn’t test your $2000 limit but you will be hit with interest so throw some extra money into the every couple of months to cover this.

Over the course of a year you should maintain an average balance (depending on how good your maths is) of about zero.

Keep an eye on things to make sure you aren’t sliding too far into the red too often. If that is happening then increase the amount coming out of your pay packet.

This bill payment technique won’t make you richer but you will know exactly how much spending money you have each pay packet.

If you don’t spend more than what’s in the account the balance of your pay goes into then you will live a happy life filled with fried chicken.