Aug 09, 2022  | Tags: cost of living, personal finance

Our insights

The rising cost of living is putting everyone under financial stress. Soaring inflation has families the world over feeling the pinch.

In Australia, inflation has reached 6 percent and beyond in 2022, while the U.S. is reeling after it was announced inflation had reached 9.1 percent.

Surging fuel prices have been one of the leading causes of inflation the world over and rising interest rates have exacerbated the pain for many families paying off a mortgage.

But there are ways to tighten the belt and protect yourself from this economic double whammy. 

Review

Set up a spreadsheet and comb through your bank and credit card statements, documenting where all of your money has gone for the last three months.

You need to be fastidious about this.

Every dollar spent and every dollar earned needs  to be accounted for. . It’s the only way you’ll know exactly where your money is going and how tightly you need to rein in the spending.

Work closely with your accountant and financial adviser to ensure nothing is missed.

There is much to be learned from those banking statements. All those little fees and charges add up in a big way.

Shop around for credit card and even bank options, to ensure you are getting the best possible deal. 

Insurance is another big one to review. And this is one that works both ways - while you don’t want to be paying unnecessary premiums, you also want to make sure that you are not underinsured. Your financial adviser will be able to guide you through the life insurance and income protection options and make sure you’re covered.

Also take the time to weigh up electricity, gas, phone and internet provider options. It really is worth the effort, as you consider your usage needs and compare different products and services.

You’ll be amazed how much you can save, sometimes even with the same company, just by doing a simple review and ‘going to market’ again.

Make the tough calls 

Now that the cold, hard facts are staring you back in the face, it’s time to make some tough decisions.

Begin assessing the results and start considering where you may be able to tighten the ship and save money. 

Take action on those service and utilities providers - they’re often the easiest decisions, because often you can get a better deal elsewhere without losing out.

Consider luxuries you can do without or expenses you can delay for better times down the track. Look out for all those direct debit payments you’ve signed up for and make some hard calls.

You’ll be surprised as to how much is spent on items barely used. For example, do you really need three TV subscriptions?

How about all those UberEats charges? Maybe cut down on eating out and do away with all those coffees at $5 a hit. 

Watch your petrol bill. You could use discount apps where available, and websites like Petrol Spy to check when and where the cheapest pumps are. As you make cutbacks, remember you still have to be realistic - you don’t want to be living in misery. Lifestyle and your emotional wellbeing are important, so give yourself room for entertainment and enjoyment. Just be savvy about it.

Consolidate and destroy debt 

You’ve seen where your money is going and you’ve made some difficult decisions about how to reduce your spending.

Now it is time to consolidate and destroy that debt. 

Paying off debt attracting the highest interest rate is critical and that is usually going to be your credit card. 

Sometimes people focus on clearing several smaller debts first but it’s usually far more valuable to chip away at any high interest debt. 

Have you got more than one credit card? And maybe a car loan or a personal loan as well? Then there’s the mortgage, too? You may be able to make your repayments a lot easier to manage, and more affordable, by consolidating multiple loans into one. This will save you a chunk in interest payments, and help simplify your financial world.

Refinancing your mortgage can also save you up to hundreds of dollars a month. You need to ensure your home loan is still working for you and your unique circumstances, and it is worth reviewing every 18 months or so.

Economic outlooks change and new products and competitive deals hit the market, and sometimes you can find a better option without even changing lenders.

Our team at Calder Finance can do the hard work and research for you and find the best fit loan solution.

Debt consolidation and refinancing has the potential to free up a lot of financial capacity.

Set your budget, and stick to it

You’ve reviewed your spending habits, cut back where you can, begun eliminating debt and consolidated your loans.

Now it is time to create a budget and stick to it, building new financial habits that will ensure you get on top of your cost of living, and set you on the path to financial freedom.

It is one of the smartest things you can do.

Governments have budgets, so do businesses, and it’s essential for you too.

It takes some discipline to stick to the plan but it will be rewarding when you meet your goals and ease some of that financial pressure.

It’s best to work closely with your financial adviser on this, so you budget can be linked to your broader wealth and investment goals.

Increase your capacity

With your budget set, you can now look to create growth, by increasing the income flowing  into your household. 

If you’re employed, consider whether you have a case to ask your boss for a pay rise. 

Prepare well, detailing your performance, the extra duties you take on, over and above your job description, and provide evidence of the value you add to the business. 

For business owners, rising costs make this an appropriate time to review your pricing structure. Inflationary pressures and the cost of wages make it necessary to raise prices just to keep margins the same in real terms.

If you are still seeking more money, you may be able to make some extra dollars with a side hustle. 

Depending on your talents, there are lots of opportunities to work online from home these days, be it freelancing or consulting.

Keep the big picture in mind

Rising inflation and interest rates are challenging many people and families.

You are not alone. And you will get through it.

It is important to not lose sight of your long term financial goals and objectives.

Economic conditions will always ebb and flow. When they do, it’s vital to review your wealth strategy, optimise where possible, and never lose sight of the big picture.

Continue to save and invest for the future. And get professional advice to make sure you’re making the right moves along the way.

Get strategic advice

A hostile economic climate can present some challenges for many who have not experienced such circumstances before.

The reality is, high inflation and high interest rates are nothing new and have been dealt with by generations past. 

It’s how you deal with them that matters and that’s where getting the very best advice is critical.

Working closely with a trusted financial adviser will help ensure your wealth creation strategy remains on the rails. While your accountant can advise you on how to significantly reduce your tax bill, along with many other potential savings.

Calder Wealth Management are financial experts who can help you make the best financial decisions for your long term interests.

At CWM, we pride ourselves on leading our clients into the future with structure, financial stability and confidence.

Contact us today to discuss all of your financial needs and concerns.

Written by James Herriman.

The information contained in this article is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.

Taxation, legal and other matters referred to on this website are of a general nature only and are based on Calder Wealth Management’s interpretation of laws existing at the time and should not be relied upon in place of appropriate professional advice. Those laws may change from time to time.

CWM specialises in wealth management with a focus on advice, investment, sustainability, insurance and finance.