As interest rate rises put pressure on the hip pockets of households across Australia, professionals who help people with their finances say there are some straightforward tasks to work through that can help the personal budget.
The Australian Bureau of Statistics (ABS) quarterly price review for 2023 shows the cost of food and non-alcoholic beverages, education, recreation, and household furnishings and services rose by between 5 and 8 per cent in the 12 months to March.
Slowing inflation this week has given hope for a July reprieve from further rates rises, but in April the Reserve Bank acknowledged the “squeeze on household budgets is likely to continue for some time”, testing the resilience of households and businesses.
So we have asked a group of financial professionals for their top tips to ease the cost-of-living squeeze and to get on top of household budgets.
Shop around for a better home loan
The first step is to know what you’re paying, which can be found on your online banking or bank statements.
“There are two ways to do it,” financial adviser Ash McAuliffe says.
“Depending on your relationship with your bank, go back to your bank and ask: ‘What can you do for us?’
“But there’s a lot of value in going to the broker and saying, ‘This is what we’ve got, this is what our bank will do for us’.”
Secondly, lenders are interested in five things:
- credit score
- income (pay slips)
- assets (house value, shares, car)
- liabilities (credit and store cards, buy now-pay later)
- expenses (groceries, bills, entertainment)
Your bank will be able to provide you with your credit score, but there are also three main credit-reporting agencies in Australia — Experian, Equifax, and Illion (formerly Dun & Bradstreet) — where you can obtain your credit score.
Mr McAuliffe says this means a forensic audit of everything and that if you’re a couple or partnership, it’s essential to sit down and comb through expenses together.
“Your internet banking service will have an option to ‘contact us’ — just follow that. The other way is to ask around, get some recommendations for mortgage brokers from friends,” he says.
Anglicare Victoria financial counselling team leader Laura Powell says it is rare that banks will say they can’t do anything to help if one of their customers calls and asks if they can get a lower interest rate.
“It might be just a small amount … but when that translates into money in your pocket, it can make a huge difference,” Ms Powell says.
She urges people to ring their bank if they are in financial hardship and ask what they can do to assist.
Credit cards and personal loans
Reserve Bank data shows Australians put $33.8 million on their credit cards in April, which has steadily grown by around $500,000 a month since February last year.
“Consolidation is worth considering. Start with the worst debt, and the worst debt is if you’ve got payday loans, stuff with a high interest rate,” Mr McAuliffe says.
“There is a danger in consolidating because it can actually turn a five-year debt into a 30-year debt if you’re not careful and if you’re not focused.”
Support organisations such as Anglicare and the Salvation Army offer free financial counselling services and the National Debt Helpline can be reached on 1800 007 007.
Mr McAuliffe says people should also be careful with buy-now, pay-later services, which can be tempting to people on a tight budget, but “detrimental” when overused.
“If you borrowed $10,000 for a holiday last year, get that paid off. Once you get those out of your budget, life is a lot easier,” he says.
She’s On The Money podcaster Victoria Devine says cash flow is important to consider.
“All of us are looking for money-saving tips and tricks and hacks, but all we need to do first is look at our budget — look at what our household is actually spending,” she says.
Is there cheaper insurance available?
The ABS’s quarterly review data shows the cost of insurance and financial advice services have gone up by 5.5 per cent for the year to March.
In the past, insurance brokers would look for packages or a deal. Now, Mr McAuliffe says, a tight market means the best tools to package insurance can be found online.
Having an agreed value on the car insurance instead of a market value can help bring premiums down if the car is a little older. Increasing the excess will also reduce the repayments on the premium.
Mr McAuliffe says health insurance is a little different from home and contents or car insurance, whereby staying with one provider can mean rolling over extras, such as complex and major dental, and is beneficial for the customer.
“If you haven’t increased your cover for a while, you might be underinsured and there are clauses that say if you’re underinsured, they won’t pay out all the claim,” he says.
“If you’re a family and done with having kids, check you’re not paying for obstetrics cover.”
Can you consolidate your electricity, gas, and phone bills?
Regulators set a state or territory’s “default market offer”, which is a set base price in a competitive energy market where retailers vie for your money.
Energy rates in NSW, Queensland, and South Australia are set to increase by about 20 per cent from July, while Victoria is set to rise by a third and the ACT between 4 and 5 per cent.
Tasmania is set to increase by 10 per cent, while the Northern Territory is offering a tariff to offset its 6.8 per cent increase.
Here, Mr McAuliffe says, it also comes back to knowing what you pay. He advises to get your latest bills out and do an audit on energy usage.
Some electricity distributors, such as Victoria’s Powercor and CitiPower, have a MyEnergy facility that shows a home’s energy usage.
“Ask, do I need the heater on and what rate am I paying?” Mr McAuliffe says.
“We hear about the energy saver bonuses or credits offered to some Australians, but it’s important to follow this stuff up.”
Ms Powell from Anglicare Victoria encourages people to make a yearly practice of reviewing their providers and plans.
She says energy providers are obligated to tell their customers if they are on the best plan.
“They can switch you right there when you’re on the call,” she says.
Concession card holders should check they are getting the discounts they are eligible for, and that their utility provider has noted the concession card on their account, she adds.
“If you do have a cold house and you’re spending a lot of time in the house, it can be a lot cheaper to heat yourself rather than heating your space,” Ms Powell says.
“An easy way and a really cost-effective way of doing that is a heated throw or heated blanket.”
Choice content producer Liam Kennedy says another way people can save is by getting more out of their home appliances.
“What that means is doing things like running full loads of washing … that’s a good way to get more out of that workhorse appliance,” he says.
“Also, doing things like cleaning the filters of dryers and air conditioners to help those appliances work more efficiently, which will save you some money.
“You can cut costs by up to hundreds of dollars a year by unplugging appliances when you don’t need them, especially if they’re not very energy-efficient appliances.”
Shop smarter to feed the family and fuel the car
To get the best specials at the supermarkets, Anglicare Victoria’s Laura Powell recommends shopping late at night or early in the morning.
“Meal plan — that reduces food waste,” she says.
“It also helps stop the impulse buys when you’re at the supermarkets.”
She says homemade alternatives to expensive cleaning products can help cut back on household shopping costs.
Making your own school snacks can also be a way to cut back on costly shopping items, as could buying in bulk where possible, she says.
“Buy the large bags of chips and pretzels — you know, the big party bags — and then individually put them into the containers as you go.”
Ms Powell says buying discounted meat and freezing it can be a way to save, while Ms Devine from She’s On The Money says cutting back on meat can also be an option.
“Having a meat-free [menu] is going to take down your grocery bill a little bit,” Ms Devine says.
She says buying frozen vegetables instead of fresh produce is another way to cut costs and reduce food waste.
Salvation Army national moneycare manager Kristen Hartnett recommends people shop with a list, shop once a week, and shop alone, if possible.
“Weekly shopping means that you’re very planned — you’ve got your list and you’re sticking to it,” she says.
“The more often you’re there, the more tempting it is to buy something on special.”
Ms Hartnett also recommends having a look through the pantry.
“Often people have got things in their cupboard that they haven’t used, so clean it out and see what you’ve got in there that you can actually be using.”
When it comes to cars, Ms Hartnett says apps can be a way to find the cheapest fuel available when looking to fill up.
Cut back on the streaming services
Count the streaming services for TV, music, phone add-ons, or gaming around the house and they can start to add up.
To sign up for the cheapest plan on all the major streaming services in Australia would cost $71.95 a month.
Mr McAuliffe recommends cutting down on subscriptions.
“Let’s go Stan this month, and then when we’ve watched everything on there, we can change to Netflix.”
Mr McAuliffe has a debit card set aside purely for subscription services to track what he is paying for.
“Check your Apple subscription or your Google Play account,” he says.
“When I went through that exercise there were just so many $5-a-month-here, $2-a-week-there, costs — they are the straw that will break the camel’s back on your budget.”
Ms Hartnett from the Salvation Army suggests people consider looking to what’s available in their local area for low or no-cost entertainment, like libraries and parks.
“Connecting with people, going down to your local park, taking the ball, taking the cricket bat … whatever the facilities are in your area,” she says.
Get on the tools
Whether it’s by pen and paper, an Excel spreadsheet, using an online calculator, or smartphone app, tracking expenses is a good way to do a financial audit of yourself and your household.
“It can be a daunting job, but if you just got out a pen and paper and write out your monthly bills, your monthly expenses, and your income, that’s a really good place to start,” Ms Powell says.
It doesn’t have to be done in one sitting, and can be regularly updated as expenses roll in, she says.
“Being informed of what expenses you’ve got and what income you’ve got coming in is the first step in working out where you can move some things around and cut some slack in there,” she says.
The fintech space in Australia is the sixth largest in the world, according to Global Australia from a fintech rankings report in 2021.
An online search shows there are now multiple apps and online tools to help track income, expenses, credit scores, and assets and liabilities.
“If you end up that it’s still a struggle and you’re not making ends meet, contact the National Debt Helpline, which will put you in touch with your local financial counselling service,” Ms Powell says.
Be kind to yourself
When making lifestyle choices to reduce costs, Ms Devine from She’s On The Money says it can help to think of them as temporary measures.
“Humans, in general, don’t like feeling like they’re losing something,” she says.
“So I think reframing it to, yes, I’m going to get rid of it, but it’s a ‘not-right-now’ not a ‘not-forever’ kind of thing.”
She also cautioned people against comparing their financial situations against those of the people around them.
“Taylor Swift tickets just came out and it’s as though everybody has found money coming out of nowhere,” Ms Devine says.
“You don’t know what other people’s financial positions are.”
Ms Devine says people’s financial circumstances are often less about how much they earn and more about what they do with the money that comes into their bank accounts.
“I think we just need to take a lot of pressure off ourselves,” she says.
“So many of us expect to be able to do it all and, to me, I think that’s really wild given, especially right now, everything is so damn expensive.”
Ms Hartnett from the Salvation Army says it is important that people still make time for a bit of affordable fun, whatever that looks like for them and their families.
“We can’t lose hope in these times,” she says.
Ms Hartnett encourages people who may be feeling overwhelmed to choose one thing they want to do to help cut costs and do it, and to reach out for help from support services if needed.
“We want people to know we are there for them,” she says.