Fran Hughes: To protect your budget from inflation and interest rate pain, go back to basics

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Like many West Australians, you may be feeling the pinch of the rising cost of living, from fuel prices to household bills.

No wonder with Australia’s annual inflation rate hitting a record high of 7.3% in the September quarter. With inflation outpacing wage growth, rising costs weigh heavily on household budgets.

So here are five thrifty ways to spend less and live more.

Manage the mortgage

The Reserve Bank of Australia is due to meet on Tuesday and is expected to hit households with an “oversized” interest rate hike on Melbourne Cup day. So it pays to shop around and consider options for managing your mortgage commitments.

Useful websites such as canstar.com.au Where ratecity.com.au provide comparisons with existing mortgage rates. Determine the features of a home loan that are right for you and customize a mortgage loan to give you the certainty of your repayment commitments in the short and medium term.

It may be worth negotiating a competitive interest rate with your existing bank first. Variable rates have gone from 2% to more than 5%. Negotiating with your bank may see them lower the rate by 1-1.5%. Home loan payments make up about 30% of a household’s expenses, so talking to a mortgage broker could save you money and give you peace of mind.

Dine in, not take out

The first step to beating inflation is to get back to basics by watching your household spending. Australians spend an average of $41.50 a week on delivery and takeaway options. Add to that the $70 per week spent an average of 14 cups of coffee each week.

Make a list of “must have” versus “nice to have” expenses, then start cutting back on “must have” expenses like unused recurring memberships or Uber Eats for now. Rather than takeout, make it a family dinner occasion. It sounds simple enough, but sticking to an affordable budget will ensure that the important things in life are kept, not to mention the savings.

Camera iconFran Hughes is a Certified Financial Planner and Head of Financial Solutions at Nexia Perth. Credit: LUCIDASTUDIO.COM.AU

Compare the prices

The cost of a house is by far the most draining item on your bank account. Whether you’re paying rent, a mortgage, or simple utility bills, spending money on housing is non-negotiable. Last week’s federal budget contained grim new forecasts – retail energy prices would rise an average of 20% nationally by the end of 2022, and another 30% in 2023-2024.

It pays to shop around for big-ticket items like gas, phone, insurance, and private health insurance. Make a list of fixed housing expenses and start comparing your existing costs. Websites such as synergy.net.au offer advice and comparison tools.

Buy a second hand

Textile waste is a growing environmental problem where consumers throw away clothes that are left in landfill to pile up. It can take up to 200 years for the materials to decompose.

So rather than buying new, consider a trade-in option or donate your clothes to charity and help support them by buying used. With the introduction of pre-loved boutiques and online marketplaces, there’s never been a better time to get your hands on clothing that costs less and goes a long way to help save the environment. . . and your back pocket.

Cash out

It seems we all love collecting frequent flyer points, with over 20 million members subscribing to programs from Qantas and Virgin. Compared to a savings account, we excitedly watch the points increase with every transaction, purchase or flight with the promise of one day taking off using the points saved.

With airlines in full swing, now might be the best time to cash in those points, or even those saved flight credits. Look for special offers that can increase the theoretical value of your points, with airlines offering discounts on regular airline rewards. Just last week, Virgin Airlines announced a Middle Seat Lottery prize, which turns the middle seat into a chance to win prizes like a million Velocity points, a free Caribbean cruise and more.

Fran Hughes is a Certified Financial Planner and Head of Financial Solutions at Nexia Perth.

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