Multiple interest rate rises, combined with a general increase in the cost of living, have made it more and more difficult to manage household and personal expenses. In this article, we offer some ideas about how you can make every dollar stretch that little bit further to meet various day to day 'non-discretionary' expenses, that is, mandatory costs. In our next article, we'll suggest some realistic ways in which you can better manage your discretionary spending. This may mean making sacrifices in the short term at least – but this is a small 'price' to pay in order to keep your home.

1. Open an Offset Account
A very simple way in which home loan interest can be reduced is by using an offset account. Rather than earning interest on your savings, the savings balance is theoretically deducted from the loan balance prior to calculating interest, which in turn reduces the interest charged to your loan. Another advantage is that the ATO does not consider this interest you earn as income and so you gain the benefit of offsetting your loan without additional tax expenses. Further, an offset account allows you to keep your cash 'at call'.

2. Increase the frequency of loan repayments
Each time you make a repayment to your principal and interest loan, you reduce your loan balance. Since interest is calculated on the daily balance, making repayments more frequently will reduce the amount of interest you pay over time.

3. Restructure your loan
Consider continuing to make principal & interest repayments for a portion of your debt, but interest only repayments for the remainder of the loan. Interest only repayments are common for investment loans, but they are also possible with owner occupier loans. You may think you'll never pay your loan off if you are not contributing to the principal, but it may be a good short term option for you to free up some income and assist with budgeting. For most standard loans, you can arrange interest only repayments for up to 5 years.

In addition, or as an alternative, you may want to fix part of your loan for a short time, say 2 years. Fixed rates are not necessarily lower than the current standard variable rate, but loan payments on the fixed loan will not change during the fixed rate period. This could help you with budgeting and protects you against further rate rises.

There may be fees for splitting your loan or varying the terms of your initial loan contract – check with your mortgage broker or lender. And don't forget that with variable loans, you can still make extra or lump sump repayments when your financial situation improves.

4. Debt consolidation
With the recent growth in the Australian property market, there may be some equity (extra value) in your home that can be used to consolidate other expenses such as a personal loan, car loan or credit card debts. In many cases, the increase to your home loan repayment is less than the combined repayments on each smaller debt, making managing the repayments relatively easier.

5. Ask your current lender for a better deal
Approach your lender and ask them for an interest rate discount. You may be surprised at the response. They want to retain your business and so depending upon the level of your debt and your loan product type, may be able to offer up to 0.8% off the standard variable rate.

6. Refinance your loan
If your lender rejects your offer to keep your business with them, consider refinancing your loan. There are many different lenders offering a range of very good loan products. It could be the case that you don't have the best loan product or structure to suit your circumstances. Refinancing can often involve exit fees and so it is worthwhile to look into all the detail, including your initial loan contract, before making a decision to move your loan. If you don't have the time or inclination to do this research, seek out a reputable mortgage broker who can investigate options about how you could be better managing your loan.

7. Managing utility bills
Most utility providers offer various payment assistance arrangements. One such arrangement is an ongoing 'Payment Plan'. The provider looks at your previous year's bills and averages that cost out as fortnightly contributions over the next twelve month period. For example, if the total cost of your previous year's electricity was $1200, then the arrangement would be for you to pay around $45.50 per fortnight. This means that sometimes during the coming year your account may be in credit and other times in debit. It doesn't reduce the overall cost of your electricity, but it means that you are not hit with a big bill at any time during the year and can budget for this expense more easily.

8. Food
There are so many things we can do to reduce the unavoidable expense of eating! One of the easiest is to take some time planning the week's meals and make a list before you shop – this helps you buy only what you really need and not what you think you need. It can help limit impulse buying, eliminate accidentally bringing home what is already in the cupboard and reduce the amount of food wasted when it spoils.

Such planning can reduce the money you might otherwise spend at a convenience store, the service station or on take away meals.

Planning can also help you work around seasonal availability of fruit and vegetables.If you need to buy fresh fruit and vegetables when not in season and actually manage to find the types you want, you will pay a premium. It's also a great idea to have a supply of frozen ingredients at hand.

Another idea is to move away from brand loyalty if you can, especially with staple foods. Most pasta, rice, flour and cereal products available here are Australian grown. The home brand products can be excellent quality. If you don't shop at Aldi – give it a try! It has a limited range, but is significantly cheaper when compared to the major supermarket chains. Although its reduced range means less choice, this also means less time spent shopping!

In Part Two of our Budgeting Hints, we'll suggest some realistic ways in which you can better manage your discretionary spending. This may mean making sacrifices in the short term at least – but this is a small 'price' to pay in order to keep your home! Look out for Part Two in our next newsletter…