Managing Cost of Living Pressures

Cost of living pressures have increased, and Australians can’t be blamed for entering the new year with a little apprehension. While inflation appears to be ticking down and the pace of interest rate hikes has slowed, there’s still a lot to feel uncertain about.

If you’re worried about your finances or simply want to improve your financial position, here are a few steps you can take to regain control and build resilience.

Be Proactive with Your Mortgage

The Reserve Bank’s campaign to quash inflation has been felt by many mortgage holders, with interest rates rising by a staggering 4.25% since May 2022. The good news is there are steps you can take to help ease the burden:

• Research the market. Compare offers from different lenders to see if your current mortgage is competitive. You might find a better deal that suits your financial goals and lifestyle.
• Consider an offset account. If you don’t already have one, an offset account could help you save on interest by reducing the principal balance of your loan. Plus, the interest saved isn’t taxable, unlike the interest earned on a savings account.

Be More Thoughtful with Your Discretionary Spending

The rise of spend-now-pay-later services, credit cards, and online shopping has made it easier than ever to part with your money. If you’re aiming to prioritise financial wellness in the new year, here are some tips to curb impulsive spending:

• Limit credit card and buy-now-pay-later use. These services can make it easy to overspend and carry debt into the future.
• Wait 24 hours before making extravagant purchases. This cooling-off period can help you distinguish between a fleeting want and a meaningful purchase. If it’s still worth it after a day’s consideration, save up and pay with cash rather than credit.

Plan Ahead to Minimise Surprises

Unexpected expenses can derail even the best-laid plans. Mitigate the impact of financial surprises by:

• Building a well-stocked emergency fund to cover unexpected costs.
• Ensuring your investment portfolio is diversified to reduce risk.
• Considering personal insurance to protect against unforeseen events, such as illness or injury.

Understand Your Cash Flow

Having a cash flow strategy is different from just keeping a budget. It’s about knowing exactly where your money is going and planning for both recurring and one-off expenses.

• Calculate the percentage of your income that covers your expenses, including irregular costs like annual subscriptions or car maintenance.
• Identify areas where you can cut back, such as cancelling unused memberships or reducing discretionary spending. Direct these savings toward your investment portfolio or paying down debt.

Find Ways to Increase Your Income

There are limits to how much you can cut back on spending. To ease financial pressure, consider boosting your income through:

• Renting out a spare room or property.
• Selling unused or unnecessary items.
• Negotiating a raise at work or looking for a higher-paying role.
• Taking on a side hustle or gig work.

Turning Apprehension into Opportunity

As we navigate the complexities of the current economic landscape, it’s essential to take proactive steps toward financial stability. Assess your budget, explore options for savings, and seek professional advice if needed. Even small changes can lead to significant improvements over time. With careful planning and a focus on your financial goals, you can transform uncertainty into opportunity in 2025.

If you think you need assistance in the new year contact us at Fiducian Financial Services Doncaster today at 03 9848 5933 or visit our website and book a free complimentary initial consultation.

Source: fiducian.com.au

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