5 tips to manage the rising cost of living

Remember when we collectively gasped at the sight of petrol hovering around the $2/L mark? Australians have been feeling the impact and navigating rising costs for months now.

Media outlets were particularly a-buzz in the lead-up to the Reserve Bank of Australia's (RBA) announcement of an increase in interest rates by 0.25 percentage points, with major banks following suit. But what does this actually mean? Why was this needed? And what does this mean for everyday Aussies?

Read on to understand what the rising rates mean for you and what 5 things you can try to manage your finances and stay in control.

What is inflation and why is it happening? 

The cost of living in Australia has peaked after more than 20 years, signalling that inflation is currently higher than normal levels. A recent Australian Bureau of Statistics (ABS) release revealed that the Consumer Price Index (CPI), which measures inflation, rose by 2.1 per cent in the March quarter and showed a 5.1 per cent annual increase. 

Inflation occurs when the general prices of goods and services rise as a result of economical and environmental factors, such as an increase in production costs or demand. 

For example, it might cost more to source produce because access to supplies are limited due to disruptions to global trade and transport during the pandemic, and therefore pushing up the cost to purchase the end-product in-store.

To help stabilise the economy, a nation’s central bank, like the RBA, will respond by increasing interest rates as a way to manage costs and demand. While this contributes to the long-term goal of bringing inflation back down over time, this will usually result in things suddenly being more expensive, leaving a noticeable impact on your finances.

How the rising cost of living impacts everyday Australians

You might have noticed the impact of inflation yourself when you’ve gone to fill up your car, grab dinner with friends, or pay for a service, like a medical appointment or childcare. You’re not alone! 

According to an April 2022 ABS release, fuel and food were among the contributors to the rising costs, in addition to new dwelling and tertiary education. 

An analysis of spending behaviours in the Beforepay community over the last year shows the direct impact these surging prices are having on everyday working Australians. 

In line with the trends in fuel prices, Beforepay users saw their average monthly spend on petrol increase from $225 in January 2021 to $255 in April 2022, suggesting we can expect to shell out upwards of $360 extra this year to fill up. 

Similar patterns were seen in spend on Accommodation and Food Services. In January 2021, before the extended lockdown and shut-down of trade, Beforepay users were spending an average of $430 per month on short-term accommodation, bars and restaurants. This jumped to an average of $490 per month from November 2021 to January 2022, but while the spike can be naturally attributed to the holiday season, the spend has yet to return to last year’s figure, with Australians now spending an average of $470 per month in April 2022. 

In contrast, a combination of pressures set on by inflation and wage stagnation may have contributed to the general decline seen in grocery expenses, with the average monthly spend of Beforepay users dropping from $320 in January 2021 to $220 in April 2022. More specifically, over the last 6 months, spending at Woolworths was down from $200 per month in October 2021 to $175 in April 2022, and similarly from $160 to $135 per month in Coles. While this may also suggest that Australians are stocking up less now with the removal of COVID quarantine and lockdown measures, it could also be an indicator of consumers cutting back on the purchase of additional essential items in response to the rising prices of produce. 

Among other notable changes in spending behaviour were the increase in costs for services. The spend on Financial and Insurance Services among Beforepay users jumped from $700 per month in January 2021 to $900 per month in April 2022. Spending on Health Care and Social Assistance followed, growing from $180 per month in January 2021 to $205 in April 2022. 

Strategies to help you manage the rising costs

Seeing the costs of our everyday living expenses rise can be stressful and worrying, but you can try different strategies to manage the change and find the ones that work for you and your lifestyle. To get you started, here are 5 things you can try to help you spend smarter and make your money last longer, without feeling like you’re missing out.

1. Review your budget

It’s easy to set and forget a budget, but reviewing your budget on a regular basis can help you stay on top of any changing conditions, such as price increases in certain areas, and adapt accordingly. 

Taking the time to consider how things like your weekly grocery budget, rent or mortgage and transport costs are changing can help you identify the areas where you might be able to cut back on, without drastically altering your day-to-day. This might be something as simple as realising you have a streaming service you haven’t used for the last two months and cancelling the subscription. That’s potentially another $30-40 back in your pocket every month to help you with petrol.

2. Look for alternative brands in your grocery shop 

We know, it can be hard to part with your favourite brand of snacks. But you don’t have to do this for everything on your grocery list! You might be able to save some dollars AND stick to your grocery budget if you swap out a few items for a cheaper alternative. 

Part of this can also be looking at what’s on sale each week and swapping these with one of your regular price items. You could even get creative and challenge yourself to write a budget grocery list that only includes sale items for that week. 

It might mean a little more planning, like spending a few minutes scanning the shopping catalogue before you head in, or paying closer attention to the price tags when you’re going through the aisles, but it could help you in the long-run!

3. Try a different mode of transport 

If you’re able, consider giving your car a break for a day or two each week and taking public transport instead. Whether a train, bus or ferry is easier or more convenient for you, choosing alternative transport options can be one way to help you manage how often and therefore how much you’re paying to fill up on petrol every week. 

Need a little motivation? How about making it social and arranging to meet a friend for your commute? We’re always more likely to do something when we do it with someone else! Or use your commute as an excuse to explore your local city or neighbourhood by taking different routes every day. Plus, think of all the health and fitness goals you’ll reach with your step count when you take public transport and squeeze in a walk. It’s what you make it!

4. Plan when you splurge 

We all need to treat ourselves. What’s the point of working otherwise, right?! Although costs are rising, that’s not to say we have to completely cut back and take away everything that’s fun. Absolutely, go get those shoes on sale or have dinner at that fancy restaurant you’ve had your eye on for a while. The key is to be smart about it and try planning these moments of joy so you can still have them, but not feel like they’re weighing you down. 

This could be choosing to place your online shopping order only once a month, instead of every weekend. Or going out once a week, instead of four times a week. Aim for quality over quantity, and you’ll thank yourself later.

5. Think twice before using your credit card 

We understand that life happens, and sometimes you might not have the funds you need to get things sorted right away, like if an unexpected bill or unplanned event comes up. While a credit card might be handy in these moments, there are other alternatives where you can avoid getting hit by high interest rates when you're only making the minimum payment every month. 

You could set up and tap into your emergency fund, or use services like Beforepay’s Pay On Demand™ to access just enough money to cover what you need for only a fixed 5% transaction fee (no interest, no late fees, no other hidden or ongoing costs). Unlike the recent rate hikes, this 5% won’t change or increase over time. With Pay On Demand™, this means on a $300 pay advance you would only ever pay back $300 plus a flat $15 transaction fee - not a cent more. 

Taking a moment to consider your options the next time you need some emergency cash can save you from paying more than what you need to in fees. 

Conclusion

The significant increase in the cost of living has left a noticeable impact on everyday expenses. But being mindful about the different approaches you can implement when it comes to how you use and manage your money can help you navigate the changing environment and stay in control and on top of your finances in the long run.

Disclaimer: Beforepay Group Ltd, ABN: 63 6933 925 505. Beforepay allows eligible customers to access their pay and provides budgeting tools. Beforepay does not provide financial products, financial advice or credit products. The views provided in this article include factual information and the personal opinions of relevant Beforepay staff and do not constitute financial advice. Please read our Terms of Service and the Terms and Conditions of our Pay Advance carefully before deciding whether to use any of our services.