Inflation is skyrocketing, interest rates are rising and many families are struggling to keep up with their rising bills.
Finding ways to reduce financial stress can be overwhelming.
For many people, the numbers themselves are hard to grasp – but they know that means tightening their belts.
The Reserve Bank of Australia raised its target for the spot rate this week by 50 basis points to 1.85 percent.
Annual CPI inflation also rose to 6.1 percent in the June quarter, on the back of higher housing costs and auto 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 people can 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 it is to retain an existing customer,” he said.
“Go to a bank branch and introduce yourself to the credit manager. It can be easier than dealing with a call center representative.”
Mr. Goh also advises people to use a mortgage broker.
“A good broker will make a better deal with your current lender and provide other suitable opportunities,” he said.
“Your current lender can respond more favorably if your case is well presented.
“For example, it’s pointless to ask your lender to match the rate your colleague at work was talking about when their loan is $800,000 when 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 percent equity in your home.”
Comparison websites can be a useful tool, but Mr. Goh warns that they are not perfect.
“You have to be careful because some products are heavily promoted on these sites and not every lender is represented,” he said.
“In addition, you can’t focus on just the interest rate or the comparison rate, as there are other things to consider, such as fees, loan characteristics, loan term and product flexibility.
“When you refinance your home loan, take into account the remaining term of your loan.
“For example, if you’ve had the property and the loan for five years, and you take out another loan for more than 30 years, you might be pleased that the monthly repayments are much lower and apparently cheaper.
“But if you only pay the minimum repayments, you may pay more interest over the entire term and it will take longer before you are mortgage-free.”
SWITCHING YOUR DETAILS
The main types of super funds are employer, retail, industrial and self-management.
Mr Goh said that before making the switch, you should seek advice if you have a defined benefit plan, a constitutionally protected fund or an employer-paid benefit.
“You can’t get your claims back once you switch to another fund,” he said.
“That may also apply to any insurance policies you currently have within your existing fund.
The IRS website is a good place to start your research.
“However, there is no point in chasing returns as past performance is not a good indicator of future results,” said Mr. Goh.
“What you need to consider is to make sure you’re paying for services and features you need and to check that the fund is investing at a level of risk that you’re comfortable with.”
INSURANCE AND UTILITIES
Insurance includes personal, home and contents, motor vehicle and health
Mr Goh advises people to seek advice when dealing with personal insurance.
“Your health status was accepted by the insurance company at the time of application,” he said.
“You are covered under the terms of the contract as long as you pay your premium, regardless of changes in your health.
“Any change to your personal insurance policy could result in a reassessment of your current health condition, which could lead to a premium load, exclusion from benefits, or outright reduction in coverage.”
General insurance is different and a cheaper policy is often a result of lower coverage or a stricter definition of benefit.
But Mr Goh said there were things to consider to make sure you pay 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 when submitting a claim is a form of deductible.
“Your premiums become cheaper if you increase the deductible on your policy. You can increase the deductible if you have saved available funds and have a low claims history.”
EATING, GOING OUT AND SUBSCRIPTIONS
When it comes to everyday expenses like food and going out, Mr Goh recommends getting the whole family involved.
“Instead of formulating a battle plan yourself, you may 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 a long period of time, rather than drastic abstinence.
“It’s easier to make small manageable changes than big ones that increase your stress level. The latter often results in increased spending through retail therapy,” he said.
“Be creative and be flexible with your meals. Replace ingredients that have gone up in price with more affordable alternatives while cooking.
“Or try preserving vegetables and making jam with products that are 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 advises people to look at their monthly subscriptions.
“It is often payments that are overlooked. If you don’t fully use the service or subscription, cancel them,” he said.
He also suggests that people find ways to reuse and recycle where possible.
“You can breathe new life into old furniture with a fresh coat of paint or a box of screws,” he said.