Over60
Money & Banking

Shop around, take lunch, catch the bus. It is possible to ease the squeeze on your budget

Laura de ZwaanGriffith University

 

It’s no secret that the cost of living has increased substantially over the last year, with rises of between 7.1 and 9.6 per cent for all households. So what can households do to manage these increases?

It might sound simple, but starting with a budget is the best approach. Even if you already have a budget, price increases mean it will need to be updated. For those new to budgeting, it is just a list of your income and expenses.

Make sure you match the frequency of these so you are working out your budget over a week, or a fortnight, or a month. There are plenty of budgeting apps and websites that can help, such as the Moneysmart budget planner.

Once your budget is up to date, you can see your financial position. Do you have a surplus of cash – congratulations! You can save that money to help you in an emergency.

But what about if you have less income than expenses? You need to work through a process of figuring out where you can cut back.

Some expenses are easy to cut back on:

Other expenses, like housing, can be a lot harder to manage.

Rising interest rates have pushed up mortgage repayments for homeowners. Mortgage interest charges have risen by 78.9% over the year to March 2023. For many homeowners, their repayments are unaffordable compared to when they first took out their mortgage.

If you are struggling to afford your mortgage, the first step is to talk to your lender as soon as possible. Moneysmart has useful information on what to do when you can’t meet your mortgage payments.

You may also be able to access some of your superannuation so you don’t lose your home, however bear in mind that this is a temporary solution and uses your retirement savings.

Increased demand for rentals has seen average rents across Australia increase by 27.4% since the COVID pandemic. Supply of rental properties is low, which means many people may not be able to find a suitable alternative if their rent increases and becomes unaffordable.

It might be necessary to take on a housemate, or move to a cheaper location (make sure to consider additional costs such as transport). If your circumstances have changed suddenly and you cannot pay your rent, contact your landlord or property manager.

If you are paying a lot in credit card or other personal debt repayments such as numerous Afterpay-style accounts, it could be a good idea to speak to a bank about consolidating.

This can help move some expensive debt, such as that from credit cards, into lower interest debt and simplify your budgeting as there is only one payment. If debt is making your budget unmanageable, then you can call the National Debt Helpline or for First Nations Australians there is Mob Strong Debt Help.

A final option could be to increase your income by taking on more work. This can be a good solution, but if you already work full time it might be unsustainable. Two common side hustles to boost income are gig work, such as Uber driving, and multi-level marketing, which is selling goods like Doterra and Herbalife to family and friends.

However, both are low paid and in most cases you would be better off earning minimum wage as a casual employee.

Laura de Zwaan, Lecturer, Department of Accounting, Finance and Economics, Griffith University

Image credits: Getty Images

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Tags:
money & banking, finance, budget, savings, cost of living