Fran Hughes: Five ways to beat the cost-of-living crunch and keep the family budget afloat

Like many West Australians, you may be feeling the pinch from rising living costs which can feel overwhelming.

It’s no wonder, with the nation’s annual inflation rate spiking over the past few years.

There may be relief in sight, with the Reserve Bank of Australia suggesting that inflation is moderating and momentum easing over recent months.

As many households are dipping into their savings and mortgage offset accounts to get through this challenging period, here are five smart strategies to manage the cost-of-living crisis.

Manage mortgage commitments

The RBA held the cash rate steady in March and made no indication of easing official rates.

However, NAB and UBS economists expect the first rate cut in November, while the Commonwealth Bank is more optimistic, expecting a cut as early as September.

It pays to shop around and consider options to manage mortgage commitments. Useful websites such as finder.com.au, canstar.com.au or comparethemarket.com.au provide comparisons against existing home loan rates.

As mortgage repayments represent about 30 per cent of a household’s budget, it may also be worthwhile negotiating a competitive interest rate with your existing bank first. An interest rate saving of 0.7 per cent on a $500,000 loan could result in a drop in expenses of $3500 a year.

Hold off on big-ticket items

The first step to beating rising costs is to return to basics by monitoring your household expenses. Holding off on big-ticket items such as overseas holidays and new cars may just save you in the long term.

Reviewing smaller regular items such as memberships to clubs and gyms as well as subscriptions and recurring expenses can make all the difference.

Recent price increases to streaming services has caused a rethink about the need for each subscription. Research has shown that Aussies waste $390 million every year on unused subscriptions. Review which ones you’re signed up to and consider cutting some out or strategically sharing multi-screen subscriptions with mates.

Make a list of “must-have” expenses versus “nice-to-have”, then start trimming off the “can-do-without” expenses for now.

It sounds simple enough but keeping within a budget that is affordable will ensure that the important things in life are retained.

Smooth out big bills

Some services — such as electricity, council rates or insurance — offer “bill smoothing”. This is where you pay bills in smaller amounts, instead of paying the whole amount in one go.

Ask your service providers if you can pay fortnightly or monthly to avoid the shock of a big bill. You might be able to make a saving by switching from monthly to annual payments, or you might decide to scale back for a few months to trim some fat from your budget.

Shop around

The cost of a home 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.

Recent research painted a grim forecasts — retail energy prices would increase by an average of 20 per cent nationally, and by a further 30 per cent in 2024-25.

It pays to shop around for big ticket items such as electricity, gas, mobile phone, insurance and private health insurance.

Make a list of fixed home expenses and start comparing your existing costs. Websites such as www.synergy.net.au offer advice and comparison tools.

Keep calm and carry on

This year is proving to be yet another challenging one for households. Stay calm and carry on. Relief is on its way.

The Stage 3 tax cuts to start on July 1 will see an increase in most workers’ take-home pay. The changes will result in the take-home pay of someone on Australia’s median annual salary jump from $53,811 to $55,172 a year — a $1361 increase.

Just like many financial cycles before, this too will pass. Set goals that are attainable and within your financial means.

When in doubt, seek the advice of a mortgage broker or financial planner, which can go a long way to giving you comfort and assistance in achieving a better financial outcome.

Fran Hughes is a Certified Financial Planner and head of Nexia Perth Financial Solutions