It’s a challenging time for household finances right now. Interest rates are rising as the Reserve Bank of Australia increases the cash rate to put the brakes on inflation, and flat wage growth means household incomes have not been keeping pace with cost-of-living increases.
The best way to deal with uncertain times, is to be on the front foot with your finances and ensure your personal financial situation is as healthy as it can be.
If you are feeling the pinch of higher inflation you’re not alone. The prices of certain goods and services have risen well over and above the official inflation measure, most notably electricity – with the wholesale price surging more than 141% over 12 months, and petrol – increasing by over 32%. We are also feeling the pain at the shops with food prices also rising and experts suggesting increases could be as much as 10%.
So as the cost-of-living increases, how do you manage to boost your savings, save for a home deposit, or pay down the mortgage to get ahead?
Let’s look at some ways you can flex your money management muscles and strengthen your financial situation.
Get off the couch
The first step is to think about what motivates you to use as your focus, so have a think about your financial goals. Are you wanting to save for a particular purpose like for a home deposit? Or are you at a different stage of your financial life and keen on getting that mortgage down or looking at investing or renovating? Whatever the goal it’s important to identify how much you are wanting to save and your timeframe.
Don’t just think about your goal in cold, hard financial terms – being emotionally connected to your goal, i.e., why this particular goal is important to you, will provide the motivation to get started and to also keep you on track.
Track your expenses
What’s your bottom line?
Get a hand with the heavy lifting
There are many and varied approaches to budgeting that you can select from, so find something that works for you. One popular method is to prioritise your savings and ‘pay yourself first’ putting a designated amount of money each month into a separate account. Alternatively, you could try the 50/30/20 method which involves splitting your monthly income into three main categories:
- 50% of your income for your needs – food, bills, insurance, transport, rent or mortgage repayments etc.
- 30% of your income for your wants – distinguishing between needs and wants isn’t always easy but ‘wants’ are generally the extras that aren’t essential to living and working like travel, entertainment and dining out.
- 20% of your income for saving
Bulking up your savings
There is nothing like the feeling of being in control of your finances and working towards a goal that you care about, so take first step to start flexing those financial muscles today.