Rachel’s year of buying nothing

When the redundancy rumours started flying, Rachel Smith vowed to stop spending. Sylvia Pennington reports. Watch the video below.

Reforming her free-spending ways two years ago has rewarded Rachel Smith with a substantial house deposit and a financial buffer to cushion her transition into freelance work.

An immigrant from Britain, Smith had been working in Brisbane as a transport consultant since 2007 but her efforts to pull together a deposit for a house in her new town had been stymied by her indulgent spending habits.

“I wouldn’t say I was a shopaholic but if I’d worked a long week I would treat myself, if I walked past Dymocks and they had a three-for-two sale on books, I’d be there and if I saw the most beautiful cushion in the world, I might like to buy it,” Smith says.

“I didn’t have any debt but, I was saving up to buy a house in Australia. In the engineering industry where I work there’s been a downturn and a lot of redundancies and like everyone else I wanted more cash in the bank.”

Working on a project in 2012 with the BMW Guggenheim Lab, a think tank to inspire innovative ideas for urban design and urban life, raised Smith’s awareness of the sharing economy and its capacity to utilise resources to the full.

Taking a stand

Work-related travel to Mumbai soon afterwards provided a salutary reminder that billions of people worldwide survive on very little.

“I’d been to Nepal and poorer countries before but on this trip we went into the slums, the places where you see severe poverty and hardship,” Smith says. 

“I went from there to the UK for Christmas and suddenly I was walking down Oxford Street with my mum and people were shopping like the world was ending.

“Then it was New Year’s Eve and I was with my friends and everyone was making their New Year’s resolutions about going to yoga or riding their bike to work, those kinds of things, and from nowhere – I guess it had been brewing deep in my subconscious – I said, ‘I’m not going to buy anything new or second hand for a year’.”

Good intentions which fell by the wayside quickly enough – in large part due to her attitude, Smith says.

“I failed in 2013, the first time I tried doing this, because I saw it as a punishment, something really negative, like a year of hardship,” Smith says. “Then I really thought about it long and hard for the rest of the year and I was a little bit angry with myself that I’d failed.”

New Year’s Eve that year saw her make the same promise to herself, but with a difference.

“I saw it as a real positive and an opportunity to share and swap and ask people if I could borrow things and just try to embrace it in a really positive way – I did those things and I succeeded,” Smith says.

When December rolled round, she crunched the numbers and learnt that she’d saved 38 per cent of her take-home salary that year.

Delaying gratification

Teaching herself to focus on financial security rather than fripperies gave her the mental and financial wherewithal to deal with being made redundant in December 2015 and meant she didn’t have to postpone her plan to buy a house.

“I’d been getting prepared for redundancy for a really long time – I’d done an entrepreneur course, I’d done my year of no buying, and I had two and a half years’ salary in the bank. I got another job very quickly, so I put all my redundancy money into my savings, which was great,” Smith says.

“I’d put an offer on a house two days before I was made redundant and had to back out but I ended up getting that house a month later because someone else’s offer fell through on finance. The bank said ‘you’ve only got a temporary job for a year but you’ve got a 50 per cent deposit’ – not many people come with that much money.”

Resolving to avoid being drawn into status-driven spending was key to keeping her savings drive on track.

“You go on Facebook and everyone’s got their best bits on there, everyone’s spending money, everyone’s living a kind of curated life where they only show their highlights, no one’s actually saying, ‘you know what, I’m doing it a little bit tough’,” Smith says.

“It’s all about, ‘we’ve just got this car, or this new whatever’ and it’s really hard not to get swept up into that kind of status shopping where everyone’s trying to outdo each other because that’s the kind of society that we live in.”

Being clear about financial priorities and budgeting money for experiences, rather than items, proved the best antidote to this ‘pressure’. She’s since written a book about her experiences: Underspent: How I broke my shopping addiction & buying habit without dramatically changing my life.

“I worked out what was really important to me and that was having money in the bank and doing things like horse riding and surfing – not spending money on stuff that I didn’t want and need,” Smith says.

November 2016
My financial journey is a series from ANZ Women on how Australian women have overcome major obstacles and taken charge of their finances.