Inflation is at an all-time high, interest rates are rising, and many families are struggling to keep up with their growing bills.
Finding ways to reduce financial stress can be overwhelming.
For many people, the numbers themselves are hard to grasp – but they know it means they have to tighten their belts.
The Reserve Bank of Australia this week raised the target cash rate by 50 basis points to 1.85%.
Annual CPI inflation also rose to 6.1% in the June quarter, due to higher housing construction costs and automobile fuel prices.
So what can you do to ease your financial pressure?
Curtin Business School instructor and financial planner Elson Goh told NCA NewsWire there are four main ways to save money.
REFINANCE YOUR LOANS
Mr Goh said anyone with a loan should contact their current lender first to try and get a better deal.
“It is often more expensive for a lender to acquire a new customer than to retain an existing customer,” he said.
“Go to a bank branch and report to the loan officer. This may be easier than dealing with a call center representative. »
Mr. Goh also recommends that people use a mortgage broker.
“A good broker will negotiate a better deal with your current lender and present other suitable opportunities,” he said.
“Your current lender may respond more favorably if your file is well presented.
“For example, there’s no point asking your lender to match the rate your colleague was talking about at work when their loan amount is $800,000 and yours is only $350,000.
“You need the right information such as the estimated value of your property and whether or not you have 20, 30 or 40% of the equity in your home.”
Comparison websites can be a useful tool, but Goh warns they’re not perfect.
“You have to be careful because some products may be heavily promoted on these sites and not all lenders are represented,” he said.
“Also, you can’t just focus on the interest rate or the comparison rate because there are other things like fees, loan features, loan term, and product flexibility that must be taken into account.
“If you’re refinancing your home loan, pay attention to the remaining term of your loan.
“If you’ve owned the property and the loan for, say, five years, and you’ve taken out a new loan again for over 30 years, you might be pleased that the monthly repayments are much lower and seemingly more affordable.
“But if you only pay the minimum repayments, you could end up paying more interest over the entire term and taking longer to be mortgage-free.”
CHANGING YOUR RETIREMENT PENSIONS
The main types of super funds are employer, retail, industry, and self-managed.
Mr Goh said that before switching, you should seek advice on whether you have a defined benefit plan, a constitutionally protected fund or employer-paid benefits.
“You cannot restore your rights once you switch to another fund,” he said.
“This may also apply to any insurance policies you currently have in force in your existing fund.
The tax office website is a good place to start your research.
“However, chasing returns is pointless because past performance is not a good predictor of future results,” Goh said.
“What you should consider is making sure you’re paying for the services and features you need and whether the fund is investing at a level of risk you’re comfortable with.”
INSURANCE AND PUBLIC SERVICES
Insurance includes property, home and contents, motor vehicles and health, among others
Goh recommends people seek advice when dealing with personal insurance.
“Your medical condition was accepted by the insurance company at the time of application,” he said.
“You’re covered under the agreement as long as you pay your premiums, regardless of how your condition changes.
“Any changes to your personal insurance may result in a reassessment of your current medical condition, which may result in increased premiums, exclusion of benefits, or outright denial of coverage.”
General insurance is different and a cheaper policy is often the result of less coverage or a stricter definition of payout.
But Mr Goh said there are things to consider to make sure you’re paying for what you need.
“For example, your home insurance coverage should only be the amount needed to rebuild your home, not the full purchase price,” he said.
“The deductible you pay on a claim is a form of self-insurance.
“Your premiums will become cheaper as you increase your policy’s deductible. You can increase the deductible if you have available funds and a low claims history.
CATERING, OUTINGS AND SUBSCRIPTIONS
When it comes to day-to-day expenses like food and going out, Goh recommends people get the whole family involved.
“Rather than trying to formulate a battle plan on your own, you might be surprised by the variety of suggestions that would come from people with different perspectives,” he said.
Mr Goh said people should make small changes over long periods of time, rather than drastic abstinence.
“It’s easier to make small, manageable changes than big changes that increase your stress levels. The latter often leads to increased expenses through retail therapy,” he said.
“Be creative and flexible with your meals. Replace ingredients that have risen in price with more affordable alternatives when cooking.
“Or try preserving vegetables and making jams with produce that is in season or in abundance.
“These are some of the things our grandparents did after the war and they managed to thrive despite similar, if not worse, inflationary conditions.”
Mr. Goh also recommends people check their monthly subscriptions.
“These are often payments that are overlooked. If you don’t fully use the service or subscription, cancel it,” he said.
He also suggests people find ways to reuse and recycle whenever possible.
“You can bring old furniture back to life with a fresh coat of paint or a box of screws,” he said.