Almost every free budgeting spreadsheet that I have seen omits a category that many Australians spend thousands of dollars on each year.
Some years it might be very little but in other years it can be tens of thousands of dollars.
In my 20 years in financial services, I have found this category of spending is the one that keeps people caught in a cycle of debt.
In my cash flow planning model I call it the broad name of “Lifestyle Item Renewal“.
If you look around your home, both inside and outside, most of the items and living areas will degrade over time and need to be replaced or renewed.
I’m referring not only to furniture and appliances, but also flooring and walls, wet areas and your vehicles.
We become accustomed to our standard of living so when something wears out or breaks we often consider it essential to replace it.
Since this is predictable I recommend you plan to afford to renew your lifestyle with savings, not debt.
As a rough guide budget:
- 12.5% p.a. of the value of your insured contents (assuming the average life of your contents is 8 years)
- 3% p.a. of your building value
If you need help boosting your saving rate, please get in touch. I’ll be delighted to assist you.