Getting Financially Fit in an Inflationary Environment

Sam Stillone 6 September 2022

Financial Goals Managing Money

It seems that rising inflation and interest rates aren’t going away anytime soon, and many households may have started to feel the pinch, and increasingly so after the RBA’s most recent monetary policy decision.

If you’re feeling a little nervous about your household budget, now is the time to zero in on the numbers and bring your finances up to speed. Our handy checklist below could help guide you through the process.

Check in on your mortgage

If you’re a homeowner, the chances are your mortgage is your biggest monthly expense, so it may make sense to start here.

If you’re on a fixed-rate mortgage, this could be good news in the short term. However, be sure to find out exactly when your fixed-rate period is ending, and be prepared to negotiate with your lender to see what they can offer moving forward. Although, before entering into a new mortgage arrangement, you may wish to shop around to see if another lender can offer you a more competitive rate of interest, and more flexibility in your loan repayments. If that’s too much to take on, consider enlisting the help of a mortgage broker to do the leg work for you—bear in mind that a fee may be payable for their services.

2. Put your utility providers to the test

Once you’ve reviewed your mortgage, consider turning your attention to your utility bills. Energy prices in particular are expected to soar, with some analysts predicting that rising wholesale prices of electricity could push energy bills up by 40 per cent*.

Tackle your utility bills one by one. A good first step can often be to call your energy provider and find out what is the most competitive plan they can offer you. Then, use this as your benchmark and start shopping around. Some providers may offer a fixed rate for 12 months, which could provide some short-term reprieve from price hikes. According to the Australian Energy Regulator (AER), shopping around can save up to 24 per cent off energy bills^#.

3. Put monthly spending under the microscope

Even with the best intentions, cutting back on unnecessary spending can be difficult without full visibility of your outgoings. Tracking your monthly spending can be an eye-opening experience, and the key to doing it properly is finding what works for you. You might be a ‘pen and paper’ person, or perhaps you prefer an Excel spreadsheet. You may like using a spending tracker app, or reviewing your latest bank statements might make more sense to you. Whichever method you decide, don’t forget to track your direct debits. You might be surprised just how much money goes out the door without you actually consciously and physically spending it.

Once you’ve done your detective work, consider setting yourself a challenge and see if you can find ways to cut back on one expense category per week. As an example, first, you might decide to change your grocery shopping habits. In week two you may decide to look at your petrol consumption—while it may not be possible to cut back on car journeys, it may be possible to use a fuel-checking app to find a service station that offers cheaper fuel prices.

4. Check that your insurance policies are fit for purpose

How long was it since you reviewed your insurance policies? A lot may have changed, so it’s important to check your insurance arrangements and make sure they still make sense for your circumstances.

While being over-insured can be expensive, this may not compare to the cost of being under-insured when you need to make a claim and find that your insurance doesn’t provide the level or type of cover you need. Reviewing insurance policies can be a time-consuming process, so it may be a good idea to tackle one area at a time, starting with your home and contents insurance, and then moving on to private health insurance, and so on.

Making changes to an insurance policy is a big decision and one that may impact your eligibility to make a successful claim. Therefore, it’s extremely important to assess your personal circumstances and needs to ensure any changes you make are in your best interests—as such, also consider seeking qualified and professional advice.

5. Bolster your emergency fund

Having a decent emergency fund can make good financial sense, but it can also give you peace of mind that you have a financial safety net to fall back on when unexpected events or expenses inevitably come up.

A rule of thumb often quoted is to have at least 3-6 months’ worth of expenses set aside as emergency funds. If you can find ways to boost your emergency fund even further, consider doing this. And, if your home loan comes with an offset account, you could consider depositing this money into the account to help with shaving off some interest from your loan at the same time.

6. Domino your debts

Often, some debt is necessary to get ahead in life, while other debts can hang around and cost us far too much in interest. If you’re keen to minimise your debts and wondering which debts to tackle first, a clear repayment strategy can make all the difference.

7. Check your Centrelink eligibility

If you’re nearing retirement, it can be a good idea to familiarise yourself with the range of Centrelink benefits that may be available to you. Doing so may give you a better picture of how your retirement income may look.

Even if you don’t qualify for a full Age Pension, you may still qualify for other benefits, such as concession cards that give you access to discounted healthcare (as an example). The Services Australia website further information about the help and payments that may be available to you.

8. Stay focused on your long-term goals

When times feel uncertain, keeping your mind in good shape is really important. One of the ways you can do this is by avoiding getting caught up in newspaper headlines and staying focused on your long-term goals. This is easier said than done, but checking off points 1-6 on the list may help. Write down your goals and put them somewhere visible. A regular reminder of your goals can be a powerful way to stay focused.

When it comes to money matters, small changes you make today can make a big difference tomorrow. If you want to discuss anything we’ve covered in this article, please get in touch.