The Reserve Bank of Australia has lifted the official cash rate to 0.85 per cent. This means an increase of hundreds of dollars in mortgage repayments each month. And it doesn’t just impact homeowners: an increase in bills and the cost of groceries, coupled with lack of wage growth, is a near-universal wallet pinch.
While we can’t control the economy, what are some realistic (and less common) ways to combat this tough economic time? To learn more, Refinery29 Australia spoke with Paridhi Jain, a financial educator and the founder of SkilledSmart, a money program designed to help people build strong financial foundations.
Firstly, Jain notes that to stay financially healthy during market lows and looming recessions, people need to get transparent about every dollar spent.
“If you don’t know where your money is going in the first place, it’s very hard to identify opportunities to actually change or improve your spending,” Jain says.
“Print out your bank statements from the last two to three months and categorise all of your spending. That will give you transparency into how much you’re really spending and where it goes.” You don't have to do this manually either. Budgeting apps can easily show your in and outgoings so you can stay on top of them.
Read on for more expert tips!
Delete, downgrade, or get a deal
“Take some time to review all of your recurring expenses and think about which ones you can get rid of (delete), reduce your usage of (downgrade), or negotiate for a better price (deal),” says Jain.
“This includes everything from your online subscriptions like Netflix and Dropbox, to your rent, phone bill, and gym membership.”
“A lot of people think that your financial success is tied to how much money you earn. I’d argue that your financial success is directly tied to your level of financial education and capability. No matter how much you earn, if you don’t know how to manage your money, you won’t be able to sustain financial success, long-term.”
“You only have two real levers,” says Jain. “You can reduce your spending or you can increase your income."
"If you really feel like you’ve done everything you can to become efficient with your spending, then it’s time to think about how you can increase your income. Sit down and brainstorm 50 ideas that you could use to earn an extra $100 a month outside of your day job. Once you earn your first $100, it will give you the confidence and excitement to keep going.”
“Could you tutor someone in a school subject? Or sell second-hand things online? If you’re willing to be a bit creative, you’ll find lots of opportunities to make some extra cash on the side.”
Learn how to invest
According to Jain, inflation is not new. Prices today are more expensive than they were 10 years ago, and prices in another 10 years will be even more expensive.
“Something we teach our students, however, is that the best way to beat inflation long-term is to invest your cash into assets that grow faster than inflation. If you’re feeling the pinch of inflation now, let it be a motivator to start learning about investing.”
Of course, when you’re struggling to pay for basic necessities, thinking about your future self and investments may be lower on the list of priorities. If you’re wanting to start with your savings first, Jain recommends setting up a ‘savings system’.
“Budgeting and savings hacks are very manual and energy-intensive, so they only work when you’re doing them. If you get busy with life and stop, then so do your savings. That means your savings will always be a roller coaster, going up and down,” says Jain.
“Instead, you want to create an automated, streamlined system to save money on a regular and consistent basis regardless of what is going on in your life. Your savings system should work for you. That way, you’re basically saving money on auto-pilot.”
Some ways to do this are to set up automated payments every payday to ensure that your savings are going out like any other bill. While the amount you can save may need to be adjusted depending on the cost of living, you’re still putting small amounts away that will all add up in the long run.
“Money is one area of your life that never goes away.”
“You can close your eyes, but when you open them, your financial situation will still be there. It’s one of those things that we all have to figure out sooner or later,” says Jain.
“It can feel discouraging because just when you feel you’re up to speed, suddenly inflation kicks in and you’re behind again. If you’re feeling the pinch of inflation, or if you’re feeling the frustration of financial struggle, channel that energy into positive action. You don’t have to take big steps. Start small, but start.”
Please note that this information is general in nature and shouldn't be construed as financial advice.