Budget Cut Disaster Looming

Illawarra Mercury

Monday February 11, 2008

By MICHELE TYDD

PEOPLE struggling with rising interest rates and petrol prices have been warned against making high-risk cuts to their budgets.

Skipping car services, buying cheap tyres and abandoning insurance were recipes for disaster, Wollongong's Investment and and Planning Services CEO Paul Plummer said.

"The temptation for a lot of people is to make cuts which don't impact on their lifestyle," he said.

"But cutting in areas such as insurance and maintenance to either home or car can result in a lot of grief later."

Mr Plummer said while belt tightening was almost unavoidable during times of interest rate rises, there were ways to do it responsibly.

His comments come in the wake of NRMA research that shows householders would prefer to keep the beer fridge full and cut back on other expenses such as insurance, groceries and petrol. Mr Plummer said he could recall countless examples of people who had regretted unwise budget cuts.

"One client stopped paying his income protection premiums and three months later was diagnosed with a heart condition which forced him from his employment and he then had to sell his house to fund his medical expenses," he said.

"Another client stopped the regular services on their car and that $100 rattle turned into a $2000 clunk."

A Wollongong auto repairer, who did not want to be named, said he had noticed a slight decrease in the number of cars being serviced since interest rates began rising.

"Some are putting the servicing off a few months or missing it completely to save a few dollars," he said.

"It tends to be the younger ones, possibly because they have taken out big mortgages."

"In the end it will cost them more, and in some cases it can be dangerous if there is a fault which needs to be fixed."

EDITORIAL Cut carefully - P41

How to cut spending

? Look to have your life insurance and income protection contracts added to and paid by your employer sponsored super fund (where possible)

? Do a budget and try to have the one-off expenses spread over a year

? Rather than going out, have a barbecue at home

? Reduce motor vehicle use where possible

? Shop wisely, reduce and avoid impulse buying

? If possible, buy in bulk

© 2008 Illawarra Mercury

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