Impact Investing, Socially Responsible & ESG Investing. Where to Begin!

*This post may contain affiliate links. This means if you purchase through the link I will receive a small commission at no cost to you. It is the way sites like this are funded, but does introduce a conflict of interest.  

Ethical investing seems like a great idea. Who wouldn’t want to help the planet, or the people on it as well as make great long-term financial returns?

I have been skeptical about the ability of these funds to match general market financial performance. After some time developing a financial plan, and choosing investments, ethical investing was put in the “too hard basket”.

In this article, I finally take a deep dive into ethical investing.

Types of Ethical Investing Strategies

What is Impact Investing?

Impact investors invest in companies with the intention of making the planet a better place. Investments are selected for their positive social and environmental impact, alongside a financial return.

Impact investing sits as a hybrid, somewhere between charitable giving and investing for profit.

What Sort of Investments are Included in Impact Investing?

The decision on which companies make a positive impact on the world is prone to subjectivity. These decisions come down to the opinion of a panel of fund managers.

Funds invest in companies they feel are making a positive impact on social and environmental issues. They can also provide low-interest loans to non-profit organizations.

Renewable energy, affordable housing, equitable healthcare and education, sustainable agriculture, conservation, and microfinance are some of the areas impact investing may invest.

What is ESG Investing?

ESG investing aims to invest in companies with positive environmental, social, and governance practices by using positive and negative screens.

ESG investors feel businesses with positive behaviours in these areas are more likely to profit over the long term. The primary aim is financial profit, with social benefit a side benefit.

It seems logical that companies that have abandoned fossil fuels in favour of greener alternatives are likely to have a brighter future.

What is Socially Responsible Investing?

Socially responsible investing selects investments based on a set of ethical standards. Those investments that don’t pass the filter are eliminated from the fund. Some examples of unethical behaviours that can be excluded are companies that are affiliated with terrorism, alcohol & tobacco and gambling.

How does Impact Investing, SR or ESG Investing Differ from Philanthropy?

Companies raise money to expand by listing on the stock market with an “Initial public offering”.

After that, their shares are traded between investors (and institutions) on a secondary market. The company does not directly benefit from those secondary market trades, just as Toyota doesn’t when one of its cars is sold secondhand.

So by investing in some sort of ethical, socially responsible or positively impactful company, you are not actually supporting that business. But you are (at least trying) avoiding profiting from unethical, socially irresponsible or negatively impactful businesses.

ESG, SRI or impact investing may fit better with your moral compass. But it is not usually the same as charitable giving. Impact investing is the closest to philanthropy, as this can include micro-loans to socially disadvantaged persons who can use those loans to better their lives.

RIAA Visual Explanation of Spectrum from Traditional Investing through ethical and impact investing to Philanthropy

Some funds cross boundaries and use a mixture of approaches. The Responsible Investing Association of Australia only certifies investment products as “responsible investments” if they:

“Have implemented an investment style and process that systematically takes into account environmental, social, governance or ethical considerations, and this investment process reliability has been verified by an external party. The product or service meets the strict operational and disclosure practices of Certification Program requirements.”

Responsible Investments Association of Australasia

Investing Fees

As you might expect, investing ethically usually involves a small fee premium. The selection of investments is, by definition, more active than a simple index ETF. But the fee premium is far smaller than I had expected.

Vanguard Australian Shares Index ETF charges just 0.10% management fee. Vanguards ethically conscious Australian shares ETF charges 0.16%.

Vanguard ethically conscious International shares ETF charges 0.18% but Vanguard Australian Shares Index ETF also charges 0.18%.

Is Impact Investing, Socially Responsible & ESG Investing Profitable?

Research into the results of ethical investing is often limited in its applicability by:

  • Timeframe researched (we really want 30-year results, but not many researchers are that patient is getting a paper published!)
  • Variable definitions of “ethical investing”. What counts? What doesn’t? The definition has likely changed over the years
  • Conflict of interest – obviously studies by funds pushing ethical investors (or vice versa) have potential to be biased
  • Selective publishing (would a research group release their data if they found a poor result?) and access to data (research showing a fund’s positive result is generally available free on their website).


Many studies over the years have largely found ethical investing to produce comparable, sometimes better returns than traditional investing. The longest duration of study I could find was over 20 years. Ippolito compared socially responsible and traditional mutual funds between 1965 and 1984 and found net risk-adjusted returns to be comparable.

A further study of 103 mutual funds between 1990 and 2001 also found no difference in risk-adjusted returns for ethical and traditional mutual funds.

Tippet, in contrast, found Australian ethical funds on average underperformed the market by 1.5% between 1991 and 1998. A further 89 ethical Australian funds were compared with the market return between 1986 and 2005, demonstrating a 0.88% underperformance for ethical funds over this period.

2000-2010 slight (statistically insignificant) advantage in British ethical funds over the market return. Socially responsible mutual funds were also found to outperform the S&P 500 between 2001 and 2012.

More recently, the Responsible Investment Association of Australasia reported responsible investments outperforming consistently over the past 10 years (ending 2021),

from RIAA Responsible Investment Benchmark Report 2021

It certainly seems promising that responsible investments can outperform the market some of the time, and match it a lot of the time.

Returns, similar to other active investments, seem to vary significantly over different time frames, swinging above and below the market returns over time.

Studies that broke down the “mean return” tended to state significant variation between the best and worst-performing fund at the time, likely due to a huge variation in investment selection strategies.

from RIAA Responsible Investment Super Report 2021

” Responsible Investment AUM increased by $298 billion to $1,281 billion in 2020, while the AUM managed by the remainder of the market decreased by $234 billion to $1,918 billion.”

Responsible-Investment-Benchmark-Report-Australia-2021.pdf (

Younger investors are demanding ethical investing options, and superannuation funds are providing these options increasingly.

There is over $3 trillion in Australia’s superannuation accounts. Given mandatory superannuation contributions, young people are far more represented in superannuation than investing outside super.

Super funds want members, and their members are increasingly wanting ethical options. The significant inflow of funds through superannuation into ethical investments may well be pushing up these prices, contributing to the good recent returns of ethical funds.
Super funds are also in a powerful position of being able to encourage positive ethical and environmental outcomes in companies that want institutional investors.

The Case for Ethical Investing

If you are frustrated by your inability to make the world a better place (on a large scale), ethical investing may appeal to you.

The idea of investing for profit whilst making a positive impact is attractive. With the increasing flow of super funds into responsible investment choices, you may believe the underlying responsible investments are likely to continue increasing in value over the next few years.

When considering the viability of the companies you invest in long-term, those already with sustainable and ethical practices may perform better financially as a result.

Challenges of Impact investing

Involves Active Management and Reduced Diversification

Ethical funds can be heavily skewed towards tech stocks due to their low environmental burden. Entire sectors (eg resources) can be excluded by some ethical funds, whilst others include every sector and select the best ethical option available. A lack of diversification can lead to more volatility and active management is known to underperform index investing over the long term.

False Dichotomy

Like people, very few businesses are all good or all bad. Hitler and Mother Teresa were extreme outliers. But most of us have a complex (and fluctuating) amount of good and bad personality traits.

Companies are the same. Tesla is one of the most front-of-mind ethical stocks for most people. Electric vehicles can make a huge difference to our carbon footprint. But lithium mining (required for Tesla battery manufacture) has been associated with child labour, severe air, and water pollution. 

This means each company requires a careful weighing up of positive and negative factors, the weighting of which is highly subjective. Would you want to be on a panel deciding which investments to include in an ethical fund?

What makes it even harder, is that some factors are easier to measure than others. Social and governance factors seem a lot harder to define, prove and measure.

How do you weigh the impact of avoiding child labour vs avoiding environmental devastation?

Green Washing & Spin

Greenwashing is when a business spends more effort portraying itself as “green” than trying to make a positive environmental impact. It is commonly used as a marketing gimmick to encourage you to buy something you don’t need because it’s “environmentally friendly.”

Businesses may be motivated to push up their own share price if key people own still own significant equity. Encouraging ethical super funds to invest may also be where greenwashing comes in. If the company is able to find specific criteria on which they will be judged, they may manipulate this.

Ethical Investing is less Powerful than Ethical Consumerism

Businesses are highly motivated by our purchasing power. Minimizing purchases, researching companies, and only purchasing from those you consider fit your personal values is likely more impactful than investing with an ESG filter.

Going car and meat-free are some of the most impactful environmental choices an individual can make.

There is also likely plenty of whitewashing going on. You may have noticed that your employers’ behaviour doesn’t always reflect its documented values and mission statement. Choosing to invest in a company because they make a written commitment to increasing the number of women in leadership positions is optimistic.

Mixed purposes

Quite often trying to “kill 2 birds with 1 stone” results in missing both. And you shouldn’t be trying to stone birds to death anyway, that’s hardly ethical ;).

Perhaps investing and doing good together may result in a suboptimal result in both. Is there a better way you can make a positive impact on the world? Perhaps through the donation of time and/or money or using your position of power to correct some wrongs you witnessed during your ascent to the top.

Investor pressure in “bad companies” can Create Positive Outcomes

Particularly when large and powerful, as are super funds, investor pressure can have a lot of influence.

Choosing Values and Aligning a Fund with Them

If you have strong opinions, and firmly held values you now need to find a fund that matches them.

Many others will be unsure of certain issues. Many ethical funds, for example, exclude Alcohol-related businesses. Alcoholism is a terrible disease that causes enormous social harm.

But I would still visit a vineyard and enjoy an afternoon of wine tasting. It feels pretty hypocritical to ban alcohol from my investments whilst directly supporting the businesses with my consumer dollar.

I am not a gambler. Casinos, pokey machines, and horse races all have their addicts too. But I don’t feel so strongly that all casinos, sports betting or pokey machines should be outlawed.

Just like alcohol, there are plenty of people who enjoy an occasional gamble relatively harmlessly. I just think there should be more protections for those that have the potential to become addicted.

How to Invest Ethically

If you have read all the above, and want to invest ethically, the first step is to choose whether you want to invest primarily for social good (impact investing) or profit (ethical, socially responsible, or ESG investing).

Wannabe Impact investors, check out the GIIN.

Start at the RIAA if you are interested in ethical, socially responsible, or ESG investing. They have a really useful tool, that first prompts you to choose your priority values and then provides a selection of funds that match the best. From there you can check how each fund checks its investments, its long-term performance (as long as possible), fees, and liquidity. Read this article for more information on choosing ETFs.

If you wish to switch your superannuation to an ethical option, RIAA is the best place to start


Many will choose to keep investing and doing good separate to keep things simple.

Ethical investing has many shades of grey, nuances, and traps naive investors. But it also has a reasonable body of evidence that it can at least match market returns, and sometimes exceed them. The Responsible Investors Association of Australia has a great tool to narrow down ethical investments that more closely match your values.

Are you an ethical investor? Please share any tips you have learned or helpful tools for budding impact or socially responsible investors below.

Aussie Doc Freedom is not a financial adviser and does not offer any advice.  Information on this website is purely a description of my experiences and learning.  Please check with your independent financial adviser or accountant before making any changes.

10 False Economy Mistakes you Will Regret

*This post may contain affiliate links. This means if you purchase through the link I will receive a small commission at no cost to you. It is the way sites like this are funded, but does introduce a conflict of interest.  

False Economy:

“An attempt to save money which actually leads to greater expense.”

Collins English Dictionary.

Have you ever purchased a cheaper option, only to have to replace it and realise you should have paid more upfront for a better quality product?

These types of examples are probably what most of just think when “false economy” is mentioned. But there are many more ways in which false economies can trip you up in your financial life.

When living paycheck to paycheck, consumers inefficiently waste money as they can’t afford to pay upfront for long term value.

But even those on good incomes easily fall into the trap and pay more over the long term by trying to save money. Most of us think too short term to capture the maximum utility from our lifetime income.

This article aims to help you start thinking more long-term, spending your money in the most efficient way over your life so you can use it to squeeze out more fun overall.

1. False Economy in Purchase of Goods

We have probably all made these kinds of mistakes. When cash is tight, it’s tempting to buy the cheaper option in the hope of holding on to your cash. Of course, cost doesn’t always equate to value.

A simple example is the purchase of a new t-shirt, as a basic wardrobe staple. You could pay $1,050 for a Christian Dior shirt, $60 for a shirt from the Gap or $12 at Target.

The $12 target t-shirt is likely thinner, has poorer quality material and stitching than the Gap or Christian Dior shirt.

Many may find the Gap (or similar) option provides better value for money, as they can wear the shirt for years without it wearing out.

If you are buying a shirt for a child, or are likely to stain your t-shirt with sunscreen or just being clumsy, the cheap Target option may be the ideal option (environmental, ethical and personal style would also weigh into the debate of course).

It seems unlikely the Christian Dior shirt offers 20 x the longevity of the middle range shirt. Perhaps if you were trying to attract a superficial but wealthy life partner? Although that doesn’t sound like a story with a happy ending!

I know I have been tempted into false economies when reluctant to spend my hard-earned cash on something as boring as a household appliance. Buying the cheapest washing machine may lessen the pain at the time. But if it needs to be replaced in 3 years, uses up excessive power and water, or cannot be easily repaired you may regret it.

When buying goods, spend some time considering:

  • How you will use them (how often, how well looked after)
  • How long do you plan to use them
  • Reviews from family, friends, and online of your purchase options
  • Cost differential vs value

2. Paying for Services vs DIY

It is tempting to try and DIY everything to try and save money. A lot of the time, this can be effective. You may learn new skills and even have fun.

But sometimes you end up saving less money than you would have earned working that number of hours. Worse, if you end up with a disastrous result it could cost you a lot more to fix it up.

Consider carefully which services you need a professional to get the job done properly. Weigh up how much time it would take you to perform the job yourself vs working some extra hours to pay a professional.

Be honest with yourself though! I suspect it’s not uncommon for high-income earners to work an extra 2 hours will cover a weekly cleaner plus change. But they don’t do the extra paid work, or anything else productive so the cost just eats into their potential savings.

When considering whether to DIY or pay a professional:

  • What will the result with DIY vs profession
  • Cost of professional service vs Cost of your time
  • Will you use the extra time to earn the extra?
  • Can you afford the extra money to be spent out of your income

3. False Economy in Paying/Saving Interest

Paying the minimum payment on a credit card balance makes the repayment seem “affordable”. Credit card companies (much like investors) love to receive compounding interest every month.

Many credit cards have a 2% minimum payment, and a 15%+ interest rate. Paying the minimum repayment will create great wealth for the credit card company, but spiral the consumer into increasingly oppressive debt it’s hard to escape from.

Avoiding all debt to avoid paying interest can also be a false economy though.

Debt can be good, bad or tolerable.

Credit cards and other high-interest debt are almost never productive. Investment debt is considered good, or productive debt.

Investing borrowed money to earn returns greater than the interest paid is a common (but optional) way to accelerate wealth building.

Homeowner debt is considered tolerable, but when maintained instead of paid down to allow investment of funds instead, is as productive as investment debt (though you may want to consider debt recycling to improve tax efficiency).

Paying down your home mortgage can be considered a false economy due to the potential investment returns lost.

But this has to be weighed up against the significant emotional gains of having a debt-free home. With recent 70%+ increases in income protection insurance, paying off your home loan may provide better value by allowing you to reduce insurance requirements.

4. Deferring Critical Spending

When considering a potential expense, consider whether it is essential. Often the inevitable spending are the boring costs none of us wish to pay for.

Home maintenance is a classic example. Regular maintenance is likely to prevent larger and more costly repairs in the future.

Looking after your health is another. Preventative health checks can avoid a whole world of pain, emotionally and financially. Not being able to work in a few years time is likely far more costly than just dealing with a health issue when it is reasonably small and manageable.

5. False Economy with Your Time

Anyone who has been following the personal finance crowd for a while will understand that personal finance is not really about money at all.

“Finance enthusiasts” get their money sorted in order to gain control over their life, particularly their time.

Terrible things happen to great people all the time. And it’s far too easy to assume we have all the time in the world.

Avoiding productive and meaningful activities because you don’t “have time” and waste too much of it scrolling or watching Netflix is a false economy. Make the time first for the most important things to you. Try and fit the rest around this. What are your big rocks to get in the jar first?

6. Skipping the Emergency Fund

Some sites (particularly for doctors) advocate skipping the emergency fund.

I think each individual has different emergency requirements. But most of us could imagine a one to two thousand dollar expense that could come up. Those with families, homes, and investment properties could have unexpected expenses running into the tens of thousands easily.

You may need a backup fund in case of unemployment. Do you have a permanent contract and are an essential worker? Are you a single or double-income household?

If you save equivalent to the largest emergency expense you can imagine each month, perhaps you can use a credit card (kept only for emergencies) to cover the expense until payday? I am pretty risk-averse, but we are all different. I can see for those without a mortgage, earning ~1% interest for emergency fund savings is unappealing.

Make sure you think about all scenarios in detail before deciding to give up on the emergency fund. I wouldn’t be without it.

If you have a mortgage offset account, you can keep an emergency fund in there and save interest (tax-free). There is still an opportunity cost of keeping your cash in an offset over investing, but it is not as severe.

Those with a mortgage offset will at least be able to save interest equivalent to long-term inflation.

7. Saving Money on Critical Insurance

I know, another horribly boring way to spend money! People are tempted by the two extremes – either paying for every insurance going due to loss aversion or tempted to skip critical insurance.

When considering insurance, I am a big follower of Scott Pape’s advice to only insure for catastrophic events. If you can afford to self insure, do so.

If you drop your phone, it is really annoying having to pay to replace it. But it won’t cause a major problem in your financial future. If your house burns down, or you crash into someone’s Mercedes, these unexpected expenses could make a big impact on your financial life.

Getting insurance right unfortunately requires us to think about potential events no one wants to acknowledge as a possibility.

What if you or your partner are killed, permanently disabled and unable to work? Or a child gets a significant, potentially life-threatening condition?

Hopefully, this time will be wasted as these events will never happen. But if they do, the fact you prepared “just in case” will provide some relief and a lot less stress on top of what is already an extremely stressful and unpleasant experience.

8. Not Investing in your Relationships

Perhaps you have drunk the personal finance cool-aid, and are completely on board with delaying gratification for the greater financial good.

There still needs to be some balance along the journey.

If you sacrifice everything, work every hour available, hit a super high savings rate but have no time to spend with the ones you love, you are very likely to regret it.

Relationships are what make life enjoyable, far more so than incredible luxuries and experiences. Have you ever been sightseeing on your own? It just isn’t the same without someone to share it with.

Neglecting your family and friends can lead to more distant relationships that can be hard to heal. Not treating your spouse as you should can lead to the potentially most expensive life event of all, divorce. Neglecting your kids will lead to a lifetime of regret that no amount of money will compensate for.

Cherish those important to you. Make it a priority, and build habits that strengthen the bonds that are important to you. For those that tend to forget, and time slips by, create regular reminders (I use todoist*) for yourself to check in with the important people in your life.

9. Neglecting Saving for Retirement

Retirement is not a very appealing prospect in your 20s and 30s, particularly if you are embarking on an exciting career.

But saving for the long term will provide so many benefits and options available only to those who are financially secure with savings.

You are also probably broke and think you can’t afford it. But it really only takes a tiny amount when you are young to make a big difference over the long term. In your 20s pick the low-hanging fruit. Take advantage of low-income and spouse contribution tax offsets when you can. Consider starting a micro-investment account and start investing tiny amounts whilst learning about the stock market. Salary sacrifice to gain any employer bonus super contributions. If you know where you’re going in life, make a plan. If this is overwhelming, start saving and build up to a savings rate of 20%.

When you can afford a little more, try to increase your salary sacrifice or deductible super contributions to reduce your tax burden. Build up to maximizing your concessional contributions as your income improves. When that pay increase comes, think about making or adjusting your plan, and investing outside superannuation if appropriate.

Waiting until your 50s to start ramping up super contributions is inefficient, particularly if you then need to make non-concessional contributions (having paid your full tax). Spreading super contributions throughout your life is the most efficient use of your money due to tax concessions and compound interest. That leaves you with more money over your lifetime for the fun stuff!

10. Blowing your Pay on Tax

Tax is our biggest (by far) expense, costing around 30% of gross income. Over a 20 year career as a staff specialist, I expect to pay at least $2.6 million in tax.

You will pay a lot of tax over your lifetime, depending on your career and working longevity, more or less than the figure above.

Doctors often make foolish decisions, led by the desire to pay less tax. Making investments for tax savings is a terrible idea. Spending money for the tax deduction also doesn’t make any sense. At least 55% of the cost is coming out of your own pocket rather than the ATOs.

So decisions should generally not be made based on potential tax savings, but once a decision to invest or spend on a tax-deductible expense, an effort should be made to ensure tax is minimized. This means, making sure you have a system for collecting details of tax-deductible expenses so you don’t forget any at tax time. With investments, consider the tax implications before committing, as a change in the structure in which you invest may make a significant difference (trust, super, company, individual, education investment bonds).

The one investment I think you should consider tax first is superannuation. If you are paying 32% tax, you will receive a 17% immediate return by salary sacrificing extra into superannuation.

By taking advantage of spousal super contributions while they have a low income you will receive up to 18% immediate return.

The government’s co-contribution scheme will provide a 100% immediate return on $1000 voluntarily contributed to superannuation earning less than $41,112. That is a risk-free return. Unbeatable!

All these benefits have income thresholds, and super balance limits set, which means you will become ineligible as your income and super balance increase. Take advantage of huge risk-free returns while you can!

False Economy Conclusion

Avoiding false economy spending is all about thinking long-term. Few of us can see our entire life’s trajectory, so often we are forced to work on likelihood.

Spend some time weighing up how to deploy your funds effectively over your lifetime, and get the most bang for your buck.

Aussie Doc Freedom is not a financial adviser and does not offer any advice.  Information on this website is purely a description of my experiences and learning.  Please check with your independent financial adviser or accountant before making any changes.

10 Wasteful Expenses that are Robbing You Blind

*This post may contain affiliate links. This means if you purchase through the link I will receive a small commission at no cost to you. It is the way sites like this are funded, but does introduce a conflict of interest.  

Are you trying to find ways to cut back on spending without missing out on life?

The financial independence community tell us that cutting spending in the three biggest categories (usually housing, vehicles and groceries) will make the most dramatic difference to your ability to save.

This is really useful advice to consider for those starting out, as buying less home and car than you can afford can provide a lot of freedom in life. But these may be non-negotiable or already optimised for your household.

There is usually still plenty of wiggle room to reduce spending in other categories, particularly if you are a high-income earner.

What are Your Top Three Expenses

Some high-income earners may find their three top spending categories are not as expected. Our highest spend before COVID-19 was on holidays (and no regrets!)

According to 2016 ABS data, high net worth households spend on average:

Of course, it is even more useful to track your own spending and work out which categories your own splurges lie.

But I think these statistics are also very useful.

Low, middle and high income earning households on average spent the most on:

  1. Housing
  2. Food and non-alcoholic beverages (Transport for high income earners)
  3. Transport (food and non-alcoholic beverages for high income earners)
  4. Recreation
  5. Miscellaneous goods and services (Medical care & health expenses for low income households).

Recreation, transport and miscellaneous goods and services seem to cost more of our income, the higher income and wealth a household has.

Now, much of that is (hopefully) conscious. Once a household has accumulated a reasonable net worth (within the top quintile according to the ABS), they may well decide to loosen the purse strings and upgrade the car, as well as spend more on recreation and non-essential goods and services.

Remember being wealthy (having a high net worth) is very different from having a high income though. A high income will not necessarily result in wealth unless the high-income earner invests a proportional amount of that income.

If you’re only just starting your investing journey and would not yet consider yourself high net worth (or on track to your goals), recreational and miscellaneous goods and services are expenses worth examining closely.

Let’s look in detail at the wasteful expenses that could be blowing your chances of developing wealth over the next few years.

1. Paying More Tax than you Need

By far our biggest expense is tax, a category often forgotten when looking at spending. Of course, you cannot avoid tax. But you want to make sure you are optimising it and making your income as tax efficient as possible.

This category is often forgotten, as unless you are self-employed, you rarely have to make a physical payment to the ATO. You don’t miss the tax as you never see it. But you could be losing thousands of dollars you could better spend elsewhere.

Saving on tax involves a little bit of education and organisation, but zero lifestyle sacrifice. Read all your options to save tax and get them sorted asap.

2. Not thinking about Grocery Expenses

It’s way too easy to consider grocery costs as non-negotiable. Realistically, many of us spend far more than is necessary. Cutting down on these expenses can create immediate savings, but involves a change in thinking and habits. Options include:

  • Shopping once a week/fortnight only (+ fresh produce top ups)
  • Attempting to purchase as much unpackaged foods as possible (good for you, the environment and your budget)
  • Meal planningg
  • Buying and cooking in bulk and freezing meals for easy dinners
  • Buying packaged food with lowest price per unit ($/kg etc) – reduces cost and packaging
  • Challenging yourself to eliminate food waste by using up all leftovers
  • Using a cheaper supermarket if available in your area
  • Collecting points and using them productively if using Coles/Woolies
  • Setting a budget for your weekly shop and keeping under it (limits non-essential spending)

3. Stop Paying Double / Triple for Convenience

It’s easy to fall into the trap of paying a lot for convenience food.

Paying $3.50 for a bottle of water doesn’t seem like a big deal. Until you consider if you were a bit more organised you would have brought your own for free, without the negative environmental impact of a disposable plastic bottle (and water, if the advertising is to be believed, transported from a faraway mountain stream!)

$3.50 is not going to move the needle on any of your goals. But decisions like this made over and over again do add up to a significant impact.

Instead of considering the actual cost, consider the multiple you are paying over what you would pay if you were organised. According to the University of Queensland, the cost of tap water is approximately 0.3c per litre. So you are paying 100 times the cost if you forget to take your refillable water bottle.

Eating out costs a lot more than preparing your own food, and is almost always a lot less healthy. Save eating out for special occasions, a carefully chosen restaurant with a great atmosphere and amazing food. Otherwise, build a repertoire of mostly healthy snacks you can prepare easily and take with you.

4. Prioritise Discretionary Expenses

The easiest way to prioritise “recreational” spending is to separate money available for discretionary spending and limit it.

With a regular, but limited supply of “fun money” over time, anyone learns to optimise it. You far more quickly learn what spending didn’t provide great value, and stop repeating the process.

This is a great strategy for couples, particularly with one spender and one saver. You will both need to come to an agreement on the amount of discretionary spending that should be allowed. I suggest individual limits, so the saver is encouraged to treat themselves a little, and the spender feels they can indulge themselves without invoking judgement from the saver.

5. A Luxury Vehicle before You’ve Earned It

Young men, particularly, seem to feel a lot of pressure to prove themselves via the vehicle they drive. Purchasing too much car too early in your financial life can really damage your chances of ever actually being wealthy enough to afford a flash car, financial security etc.

“Buy the cheapest car your ego can afford”.

For those of us without a lot of ego or interest in vehicles, you probably want one that won’t break down on you!

If a flash car is something you aspire to, make it a long term goal and reward. Get your dream car, after you have got your finances on track. Then you will be able to enjoy it without financial stress or regrets.

6. Stop Impulse Purchases

Does that “Miscellaneous products and services” ring any bells?

Is anyone else struggling with the fact you don’t even need to go find the credit card to make an online purchase anymore?

Advertising is getting smarter all the time. Adverts are woven into social platforms and individualised based on google searches, comments, clicks or even spoken about within earshot of our mobile phones. I’m sometimes convinced google can actually read my mind.

I am now the proud owner of a “lotus mat,” promising to take away all my aches and pains and have me practising yoga until I a centurian. I know. I’m a doctor. I know better. But it sounded so good! A magic fix for irritating musculoskeletal problems that is costing me hundreds of dollars in physio and daily exercises forever.

Spoiler alert: It doesn’t seem to be a magic fix. My purchase will probably end up stuffed into a cupboard only to be rediscovered in a few years.

Yes, I don’t really need to save a lot more money. I’m already on track to our goals. But I also don’t need a load of rubbish in my house overflowing out of my already overstocked storage.

Nowadays I keep a wish list in a notes app on my phone. When I am tempted to buy something (often as a result of a Facebook ad) I add it to the list. Given a month to think about it, I realise I don’t want most of these items, and I am more aware of the costs of my potential purchases with a month worth listed on my phone. The things I really want that will fit into my fun spending budget I can then purchase.

7. Mobile Phones & Internet

I hope you are not still buying mobile phones “on contract”. You know the phone companies are ripping you off. Buy phones outright and choose the contract separately.

Consider buying not the latest model of phone to save a few hundred dollars, but the recurrent costs of the contract are probably more significant.
To save even more you could go for an annual plan such as that offered by Kogan.

Similarly, shop around for internet providers, There is a lot of competition now and they often use the same network as the big providers.

8. Stop Wasting Power

Power costs have been escalating for years. Taking the steps to save power daily can seem like a hassle, but like most other things, can easily build into habits that become second nature.

Use appliances (like your washing machine, dishwasher, pool pump) at the cheapest time of day, using timers if necessary. Get your home insulated to reduce heating and cooling costs. Set air conditioners to 25C and heaters to 20C and isolate rooms to use them in, with closed doors and windows. Turn appliances off standby as part of your routine (you can get remote controls to make this easier).

Buy energy-efficient appliances, and shop around for the best deal on power. Having purchased a home you plan to stay in for many years, consider solar panels.

9. Alcohol

Alcohol is a huge and often destructive part of Australian culture. It is easy to spend a lot of money on booze.

Alcohol helps many of us relax, but at what cost?

It often results in poor sleep, reduced productivity, mood depression and poor long term health.

If you drink, alcohol should be part of your “fun money” budget. Consider cutting down if you think it is providing more downside than up, and find new relaxation rituals.

10. Outsourcing

Outsourcing can go either way. At some point in your life, it will make sense to roll up your sleeves watch a youtube video and get on with it yourselves. As your income increases and you become more aware of your own strengths and weaknesses, it may be worth outsourcing certain jobs.
When considering whether to DIY or outsource weight up

  • Cost of outsourcing vs post tax income of you working extra hours (if available) instead of doing the job yourself
  • Quality of result likely outsourcing vs DIY
  • Whether you will enjoy the challenge of DIY
  • Whether you will actually work the hours to pay for outsourcing

Even if you can Afford it, Can’t you think of Better Ways to Spend it?

It’s easy to start slacking off with all the above when you have enough to pay the bills without worrying.

It’s how many high-income earners get into bad habits and forget to save for bigger goals.

Even once you are on target for all your big financial goals, I still think it is worth considering all these wasteful expenses.

Even if you can afford to waste money, is there really no better way you can think of to spend it instead?

Aussie Doc Freedom is not a financial adviser and does not offer any advice.  Information on this website is purely a description of my experiences and learning.  Please check with your independent financial adviser or accountant before making any changes.

How Much Should you Spend on Holidays?

*This post may contain affiliate links. This means if you purchase through the link I will receive a small commission at no cost to you. It is the way sites like this are funded, but does introduce a conflict of interest.  

Are you starting to dream of travelling again?

Leaving home over the past 2 years has been a risky endeavour, with local and border lockdowns occurring frequently and at short notice.

After booking and rescheduling at extra cost again and again I have avoided booking flights anywhere recently. But with state border lockdowns coming to an end soon, and international borders open, my feet are getting itchy.

After 2 years of minimal travel, (I haven’t even been interstate, despite several attempts to) I want to go EVERYWHERE this year. It’s hard to narrow down, but visiting overseas (and Australian) family will be a priority.

Prioritising Now vs Later

This is the debate I am (and I think we should all be) constantly having.

I’m guessing anyone reading this blog is interested in optimising their finances. If you are a high-income earner, even a short period of time focusing on sorting out your finances results in outsized benefits.

There are a few perfect freaks who started investing in their teens and religiously saved a percentage of their income since birth. If you are not one of those, getting to a great financial situation is still going to take some work and effort initially.

Most of us are guilty of unconscious spending, and high earners are likely the worst offenders. It’s easier to pick up bad habits, and not bother thinking about spending.

The initial phase of finding ways to cut spending usually feels pretty painful, but it soon gets easier. Once you find the right balance, when you have cut out low-value spending, and automated your investments, it becomes as easy as your original unconscious spending lifestyle. At this stage, your financial freedom increases, allowing options that weren’t available to you. If circumstances change you are less and less “stuck” as your investments grow.

It took us 5 years of gradually increasing our savings rate to reach coast FI (for retirement age 60). At the end of this, we are ahead of schedule to meet all our goals with our current savings rate. Our savings and investments are automated and don’t really require a lot of thought anymore.

It is easy at this point to continue being finance obsessed, saving every dollar and “Unconsciously saving” as the habit of saving everything can become as entrenched as unconscious spending.

Reflecting on life, and what you want out of it is vital. Too many people let the years pass by without really thinking about any of this. No one has a guarantee of how long we have to enjoy life. There has to be a balance between now and later.

If travel and holidays are a priority, you may want to allocate more spending to this, or work out how to get more for less.

What is the Average Spend on Holidays for Australians

The average Australian spends $4,750 on an overseas trip, around 7.6% of the average yearly income.

Concerningly, around 1/3 spend more than they intended.

How Much Do Holidays Cost

Australia is the 12th most expensive country to fly internationally from.

I have certainly noticed a return flight from the UK to Australia tends to be cheaper than the same trip leaving Australia.

Some data collated by Budget Direct suggest it’s not necessarily cheaper to travel domestically.

The average cost per night of an Australian domestic holiday is $193 per person, for a trip overseas the average cost of a night ranged between $162.25 and $233.33. Average holiday cost statistics 2020 | Travel Research & Statistics — Budget Direct™

What are your Priorities?

The key to all of these articles is that you should spend your cash on what truly brings you great value and enjoyment. If you find travel stressful and would rather be at home, you would have to be crazy to pay these prices to travel voluntarily.

But I enjoy a change of scene regularly and love to see new places to explore.

If travel is something you prioritise, budget for it. Work out how you can get the trips you desire inside your budget.

For some people, travelling is about experiencing Michelin 5* restaurants and staying in the fanciest hotels. I feel like I don’t have the upbringing to feel comfortable in these places! I’d rather carry my own bag to the room than fret about what (and how) to tip a bellboy. I cringe at the thought of taking small children to these fancy establishments.

For me, travel is about experiencing as much as you can. My priorities are seeing the sights, the kids having loads of fun and being able to relax. I like to stay somewhere comfortable, but can still enjoy roughing it for shorter breaks when the dollars are better spent elsewhere.

Work out what your priorities are when you holiday.

Holiday Goals

Time to write a bucket list. If you’re anything like me, the list of trips will be large and varied! If you start with everything, you can start to work out the best order for your trips.

Timing (Read Die with Zero)

When you are young, fit and healthy it is time to enjoy the most energetic activities. Splash your cash on the activity (bungy jump?) you won’t want to do when you’re older and save splurging on the fancy hotel until you’re older (and fussier).

If you are planning to start a family in the next few years, which trips would be best before travel gets a bit more complicated?

Young families are very varied in their willingness to travel. Some avoid it as the stress of transporting kids away from their familiar environment means parents can’t enjoy the trip anyway. Others are intrepid explorers even with small kids, strapping them into backpacks for extended travel. You kids could have medical conditions that may alter your ability to travel, but otherwise, I suspect do just adapt to what the parents expose them to.

We are somewhere in the middle. I do tend to plan travel around the kids’ needs. If they are happy and entertained, I can actually relax.

You may want to time your trips around the kids’ ages. Their ability to partake in kids clubs and sports lessons may also alter the ideal timing for your trip.

Lastly, small kids are very easy to impress. Don’t use all your money with the “Wow” holidays until they are ready to appreciate them.

Under 5’s love nothing more than to camp, cook marshmallows on a campfire and collect twigs and rocks. My under 10’s still love camping but also really enjoy playing with other kids at cheap family resorts with pool slides. I imagine it’s going to take a bit more effort to get teens to declare a family holiday as the “best trip ever”.

Setting a Budget

We should all set an annual budget for holidays. However, it is perfectly reasonable to spend more in one year, as long as you cut back the year before to make up for it. A big overseas holiday to a bucketlist destination is almost always out of budget. But perhaps you could manage it if you stick to camping the year before whilst saving up?

The average spend quoted above really doesn’t mean much. The amount you should budget annually depends on your income, goals, priorities as well as how far along the financial journey you are.

If you are just starting out investing, and aren’t yet on track to your goals it’s wise to reign in the travel budget. Once you are on track (or ahead) towards your big goals, it may be time to prioritise travel more in your budget.

Sticking to Budget

Remember to budget for:

  • Flights if appropriate
  • Travel insurance
  • Car rental or public transport / taxis
  • Accommodation
  • Meals
  • Drinks
  • Special ticketed activities
  • Catching up with friends
  • Any new clothes / luggage / equipment you will need to purchase for the trip
  • 10% Overspend fund

It is very likely you will come across great experiences on your travels that you haven’t budgeted for. Do yourself a huge favour and allow 10% or so for these unpredicted expenses. You will want to make the most of your time on holiday, and do all the things.

It can be sad when holidays come to an end, you don’t want to come home to a credit card debt to be paid off as well.

Squeezing Everything Inside the Budget

I’ll bet your ideal trip won’t fit inside your budget! Time to make it fit. Work out what are your priority “Must do” expenses and cut back on the lower priority items.


  • Using credit card/supermarket points to pay partially or fully for flights or accommodation
  • Staying in cheaper accommodation (camping, youth hostels, airBnB…)
  • Renting self catering accomodation so you can prepare most meals at home. Given eating out generally costs multiples of cooking for yourself, this is likely to be a great saving (and ideal for families with picky kids)
  • Using public transport instead of renting a car
  • Reducing car rental expenses by using credit card insurance instead of being ripped off at the airport
  • Bringing your own kids car seats to avoid the daily charge which seriously adds up!
  • BYO alcohol or abstaining
  • Reducing the number of ticketed events, and looking for natural and free attractions
  • Borrowing or buying second hand clothes/luggage/equipment

You may want to earn some find some extra money to cover the gaps

  • Working an overtime shift for holiday money doesn’t seem so bad!
  • Selling items from your home you no longer use

Planning Cost Effective Travel

An Epic Road Trip

Planning an epic road trip from home can result in a fun, fantastic, and reasonably cheap holiday. Australia is an incredible destination, and could take an entire lifetime to fully explore. We took 5 months to explore with our little family in 2016, and have barely scratched the surface.

Where have you still not been within an 8-12 hour drive of home? Perhaps this year is the time to get exploring! By avoiding flights (particularly once you have kids > 2 years old) you will save hundreds, or thousands of dollars.

The bonus of adventuring for the first time is the flexibility. You can adapt the journey depending on how it’s going. Worst case scenario, you can easily pack up and come home.

Travel to More Cost Effective Countries

Travel to certain countries is obviously a lot cheaper than others. Once you have paid for flights, a long holiday in Thailand or Bali can be very cost effective. Given the flights are usually the biggest expense with these trips, it is worth going to your destination once rather than have more than one holiday to the same area. You will need long enough to do everything you wish whilst you are there.

Tack on Holidays to Family Visits

For those of you like me, with family overseas, consider booking flights with an extended stopover for a second holiday en route to your family. It means you get a pure holiday on top of the family trip, and save significantly on flights in comparison with booking a completely different trip.

Similarly, with family in Australia far enough away you need to fly, try and extend the trip and taking a side trip whilst you are there. Visiting family is awesome, but it can easily use all your paid time off as a full time employee.

Being able to take long enough off work for extended trips to make the most of your holiday dollars usually relies on being financially healthy with a flexible employer. Some employers (including public health) allow time off at half pay which massively increases your holiday flexibility. Being self employed can provide the most, or least flexibility depending on the business you run. I don’t see many farmers taking holidays!

Working Holidays

Are you a highly skilled worked in demand? Doctors and nurses are in short supply in so many rural and regional towns, often in fantastic locations.

Locum agencies will usually pay to fly you to the location, and will often provide family friendly accommodation if requested.

You may be able to negotiate days off between shifts, or to delay employer paid flights home for a few days. That way you can tack on a mini holiday to the (largely employer paid) work trip.

This is a great solution to those in the early days of getting serious saving and investing, and with little cash to spare. You often get to see a part of the country you would never have known about prior, and do some sight seeing without spending much. Meanwhile, you boost your savings with the extra earnings and help out a much in need workplace.

Don’t Miss out on Holidays Because you are Saving

No matter what stage of getting your financial life sorted you are at, I don’t think it’s a great idea to miss out on holidays all together.

Work out your goals, priorities, financial stage and get imaginative. Work out the best way to get maximum holiday fun for your budget.

Comment below, do you have any other tips to squeeze more awesome experiences from a tight holiday budget?

Aussie Doc Freedom is not a financial adviser and does not offer any advice.  Information on this website is purely a description of my experiences and learning.  Please check with your independent financial adviser or accountant before making any changes.