“We are facing a crisis on top of a crisis”, says Kristalina Georgieva, the Managing Director of the International Monetary Fund.
Although inflation has increased in Australia, it remains lower than in many other countries, according to the 5 April 2022 statement by Philip Lowe, Governor of the Reserve Bank of Australia (RBA). And interest rates remain at a very low level, although mortgage rates for new loans have risen recently.
Unfortunately, things are going to get worse for us before it gets better. “Higher prices for petrol and other commodities will result in a further lift in inflation over coming quarters”, according to the RBA statement. “The main sources of uncertainty relate to the speed of resolution of the various supply-side issues, developments in global energy markets and the evolution of overall labour costs.”
So how are you going to get through this year, when prices are rising for everything from food and other commodities to housing, but your wages and incomes are not keeping up?
There are some things you can do now to ride out the rising cost of living.
Rethink your personal and family budget
“If you were not into personal or family budgeting before, now is the time to do it”, says David Boyd of Finty.com, the financial comparison site. Budgeting is simply listing out how you get money and how you spend that money.
Just making a list to know how much money is coming into your pocket and how much is likely to be going out will automatically sober up anyone’s enthusiasm for spending.
Watch your non-essential spending to make cuts where necessary
This is easy to say, but it’s a tough job to tackle. You can’t begin unless you actually made a list of all your monthly expenses, so make that the first step in your budget process.
Once you know where your money went last month, you can make a fresh start for this month and the next. Pay close attention to what you spend on food, clothing and accessories, gadgets, subscriptions, and entertainment expenses.
To know what to cut out, you first need to separate your wants from your needs.
Do you really need to eat out each week or go for takeaway food a few times a week? How about making your own lunch? Skipping that expensive coffee fix? You might be surprised how much you can save.
Since big ticket items are going to be way costlier this year, delay replacing things that are working perfectly. In fact, you may want to delay all non-essential spending till things get back to normal. Perhaps you want to cancel that hardly-used gym membership and all those subscriptions and apps you rarely get to use.
But there are creative ways to put some money in your pocket.
Use a rewarding credit card
Cutting down expenses does not mean you stop spending entirely. You still need to buy stuff, groceries, clothing, fuel and will continue to use credit cards. But you might as well get rewarded for doing so (so long as you use your card wisely).
It looks like that message is already getting through because, according to Finty, the number of consumers searching for credit cards with benefits has gone up substantially.
Finding the best deals and the right credit card — whether that’s a cash back card, rewards card, or even balance transfer card — can go a long way towards making the most of your limited spending.
“Look for the best deals on cashback, rewards and grocery credit cards. Seek out cards with big signup bonuses. Cashback cards help stretch each dollar of spending further. Rewards and grocery cards offer attractive discounts on regular purchases and other perks you may otherwise pay for,” says Finty’s MD, David Boyd.
Whatever the card, remember that the goal is not to go on spending sprees; it is to bring down your spending by stretching each dollar further.
Pay down your debts, including high credit card balances
Raising interest rates is a common tool that central banks like the RBA use to control inflation. Now that they have raised interest on home loans, expect hikes in most other types of credit as well. This means your variable rate loan interest installments will go up.
Paying down your debts, especially since savings rates are so low at the moment, makes sense. This helps you avoid the coming high interest payments.
Find new sources of income
One way of increasing your income is to get into gig work. Globally, the gig economy is projected to grow from $204 billion in 2018 to $455 billion in 2023. That is a tremendous compound annual growth rate of 17.4 percent. Freelancer numbers have been growing steadily in the Western World and most Australians are open to gig work. The high growth is prompting our legislators to come up with gig worker protections. If so many Australians are into it, why not you?
How about turning your hobby or special skills into a side hustle? Every extra dollar will help you in these high inflationary times.
Shop via a cash back website
Cash back websites pay you to shop via their website. That may sound strange, but it does work.
Retailers pay the website sales commission, which the website then shares with you. The amount of cash back you can earn varies between websites and stores (they all have a similar mix of brands).
If you are diligent, this is a great way to claw back money. Popular cash back websites include Cash Rewards, Kickback, and Shopback.
These are just some of the ways you can beat the rising cost of living in 2022.
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