About the author
Jane Slack-Smith has been named one of the Top 10 Property Experts in Australia by Money Magazine, one of the Top 4 Financial Influencers by Qantas and been awarded the Australia’s Mortgage Broker of the Year twice.

It’s a challenging time for household finances right now. Interest rates are rising as the Reserve Bank of Australia increases the cash rate to put the brakes on inflation, and flat wage growth means household incomes have not been keeping pace with cost-of-living increases.

The best way to deal with uncertain times, is to be on the front foot with your finances and ensure your personal financial situation is as healthy as it can be.

If you are feeling the pinch of higher inflation you’re not alone. The prices of certain goods and services have risen well over and above the official inflation measure, most notably electricity – with the wholesale price surging more than 141 per cent over 12 months, and petrol – increasing by over 32 per cent.^{i, ii} We are also feeling the pain at the shops with food prices also rising and experts suggesting increases could be as much as 10 per cent.ⁱⁱⁱ

So as the cost-of-living increases, how do you manage to boost your savings, save for a home deposit, or pay down the mortgage to get ahead?

Let’s look at some ways you can flex your money management muscles and strengthen your financial situation.

Get off the couch

The first step is to think about what motivates you to use as your focus, so have a think about your financial goals. Are you wanting to save for a particular purpose like for a home deposit? Or are you at a different stage of your financial life and keen on getting that mortgage down or looking at investing or renovating? Whatever the goal it’s important to identify how much you are wanting to save and your timeframe.

Don’t just think about your goal in cold, hard financial terms – being emotionally connected to your goal, i.e. why this particular goal is important to you, will provide the impetus to get started and to also keep you on track.

Track your expenses

To get off and running, add up your monthly expenses – the more information the better, so include quarterly or annual expenses as well as your discretionary spending which may be a little more difficult to track. As you go through the figures to come up with a total of your spending, see what you can learn from your spending patterns and where you might be able to cut back.

What’s your bottom line?

Analysing how your financial situation is faring is then a matter of taking your income over the course of a month and subtracting your total monthly expenses. Once you have a clear picture of your current financial position, it’s a matter of tweaking your spending and/or your income over a specific time frame to meet your financial goal.

Get a hand with the heavy lifting

Sounds easy but tracking expenses and sticking to an allocated budget can be tough, so why not let an app do some of the heaving lifting for you. There are many options including Beem It, Fudget, and Pocketbook. It’s also worth checking what budgeting features are offered by your bank or financial institution.

There are many and varied approaches to budgeting that you can select from, so find something that works for you. One popular method is to prioritise your savings and ‘pay yourself first’ putting a designated amount of money each month into a separate account. Or you could try the 50/30/20 method which involves splitting your monthly income into three main categories:

• • 50% of your income for your needs – food, bills, insurance, transport, rent or mortgage repayments etc

• • 30% of your income for your wants – distinguishing between needs and wants isn’t always easy but ‘wants’ are generally the extras that aren’t essential to living and working like travel, entertainment and dining out.
• • 20% of your income for saving

Bulking up your savings

Discipline and developing good habits through repetition help you build your strength. Don’t panic if you have a blowout or an unforeseen event throws you off. Just get back to those good habits you are establishing. On that note it can be a good idea to have a contingency in your budget to reward yourself at a certain point or even to deal with a financial emergency.

There is nothing like the feeling of being in control of your finances and working towards a goal that you care about, so take first step to start flexing those financial muscles today.

i https://www.abc.net.au/news/2022-04-29/power-pain-as-bills-tipped-to-rise-40-per-cent-on-surging-prices/101023488

ii https://www.afr.com/technology/uber-drivers-stay-home-and-suffer-as-petrol-prices-bite-20220602-p5aqpp

iii https://www.news.com.au/finance/economy/australian-economy/food-prices-fears-of-10-per-cent-hike-due-to-rising-gas-prices-poor-food-harvests-and-inflation/news-story/4cbf4870017a8ffa7705a58fdc1f3fb1