3 Ways You can LESSEN the Impacts from the Rising Cost of Living (2022)

The price of pretty much everything including groceries and heating your home has gone up since last year. However Down Under the living situation of Australia has had a large decrease in economic viability since the covid pandemic started in late 2019. One survey looking at living expenses across more than 350 global cities in the world currently ranks Australia among the world’s least affordable countries in which to live with Perth and Darwin emerging as the 10th and 11th most expensive cities in the world. Sydney came in as the 12th most expensive city in which to live.

The Consumer Price Index in Australia, which averaged 47.95 points from 1950 until 2021, has surged drastically and has reached an all-time high of 121.30 points in the fourth quarter of 2021. What does this mean for you?

Inflation coupled with the large increase involved with the costs of goods means that your purchasing power has decreased, so it will require more money to buy the same goods and services now than before. While it’s not a huge deal if your wages are going up in line with or outpacing inflation, it’s especially problematic for those living on fixed incomes or trying to calculate how much they need to save for Retirement.

And this year, most people’s wages did not go up nearly enough. After adjusting for inflation, seasonally adjusted, average hourly earnings fell 2.3% whereas the cost of groceries has multiplied that amount, staple increases include but are not limited to:

  • Dairy is up 19%
  • Vegetable oils are up at 50 percent
  • Cereals at 23 percent
  • Sugar is around 33 percent

So how can you lessen the impact & put your finances in a more favourable position?

1. Reduce Cost of Bills by Comparing

Australians continuously shell out hundreds a month on electricity and gas despite lower energy prices and greater efforts to reduce power consumption at home.

According to Canstar latest Consumer Pulse Report, which was based on a survey of more than 2000 Australians, an average of $335 was spent per quarter on electricity and $234 per quarter on gas in 2021

One of the easiest ways to reduce energy costs is to compare energy offers. There are free and independent government energy price comparison tools and websites. They can compare the offers from all the energy retailers operating where you live to help you find the best and cheapest energy offer.

You can opt for a more traditional approach

  • Install energy-efficient lighting
  • Adjust the thermostat
  • Get an energy monitoring device

2. Start Investing in ETFs

Our money loses its value every single year and once it’s lost, it’s lost forever. The rising cost of inflation means that $100 you earned years ago cannot buy you the same value of goods/services anymore.  Leaving your money in a bank allows its value to whittle little by little to the point where even saving money in a bank is not the most efficient way to earn and maintain your finances.

A good way to battle inflation is to store your money in a high-interest savings account which can net you up to 1-2 % per year, depending on the one you choose. BUT, you can go one step further!  By opening a trading account you can purchase shares that can go up / down depending on the asset’s performance. This can be tricky business as you can just as easily lose your money as well. This is why for a beginner it is best to invest in an ETF. The benefits of ETFs are as follows:

  • Diversification: allows you to purchase hundreds or even thousands of individual assets in a single trade Instead of putting all your eggs in one basket. This can help to diversify within an asset class. ETFs also allow you to invest in markets or assets it can be difficult or expensive to access. You can also diversify across ETFs so there’s less chance of loss if an ETF provider collapses.
  • Transparency: ETFs publish the net asset value (NAV) daily on the ASX. This can help you track how the underlying asset is performing and if the price of the ETF is close to the NAV.
  • Low cost: Alot of ETFs have a low management expense ratio (MER). They’re usually cheaper than most actively managed funds.
  • Easy to trade: You can buy and sell ETFs during the trading hours of the exchange and track them at anytime.

For example, The S&P/ASX 200 Index has an average total return of 9.3% each year. This negates your losses from inflation and can compound over the years into a small fortune depending on amounts placed into your trades.

3. Budget Your Finances

A budget is a concise plan and financial strategy for the life you want to live for your incoming and outgoing money over a certain period. We like to work with budgets on a weekly basis. For example, you may aim for certain dollar amounts or percentages of your combined monthly income to go toward various expenses, like groceries, as well as saving, investing and paying off debt.

At FIFO Management we will transform your money with our personalised budgeting services! We can assist you in creating a customized budget that maximizes your income and allows you to save, pay down debt, and live comfortably. Your savings, bills, and payments are all deducted automatically from your budget, saving you time, money, and stress. A good budget can automate your financial life and give you peace of mind while saving you a large portion of the money that would have been lost to other means. One more thing that’s communicated is your individual and/or family goals. That information will help you to have a plan for your money and keep at it. We have found this with a goal become so much more motivated. 

Check out this free and independent government energy price and comparison week: http://www.energymadeeasy.gov.au