Tips to deal with rising inflation
Key takeaways
- Investing a portion of your income is one way you can keep up with, or even outpace, inflation.
- Shopping around for the best deals on your home loan, electricity and insurance, can end up saving you hundreds of dollars over the long-term.
- You can find an extra source of income outside of your 9-to-5 job by earning passive income or renting out your garage space, for example.
Between March 2021-22, inflation in Australia rose by 5.1%. Meanwhile, wages only rose by 2.4%1. With the bare essentials becoming – well, expensive, it’s not surprising that many people are looking for new ways to save money or increase their income.
The good news is there are steps you can take—and actions to avoid—that can help you navigate this period of high inflation, for however long it lasts. In this article we look at some of the ways you can offset inflation by continuing to invest, increasing your income or reducing expenses.
Three ways to manage rising inflation
Here are some of the best ways to manage rising inflation:
1. Continue investing
Investing a portion of your income is one way you can keep up with, or even outpace, inflation. While rising interest rates or falling sharemarkets may cause many people to second guess themselves when making investment decisions, it’s important to stay focused on your long-term goals and avoid being influenced by short-term market volatility. Having a diversified investment plan—money invested across many asset classes and in many industries—will help to cushion you from major sharemarket falls.
2. Find ways to reduce your expenses (some of these tips may be obvious, but it is a good reminder)
EVERYDAY BILLS
Shopping around for the best deals on your home loan, electricity and insurance, can end up saving you hundreds of dollars over the long-term. You may also want to consider cutting down on subscriptions or memberships you don’t use, and make sure you’re getting all the concessions you’re entitled to such as rebates and pensioner discounts.
HOME LOANS
Official interest rates are predicted to continue rising throughout the year, so if you have a home loan that isn’t on a fixed interest rate, you’ll need to factor in increased repayments to your budget.
ELECTRICITY
Consider using some of these energy saving tips:
- Check out government and council rebates to reduce your energy bill
- Switch to energy efficient lightbulbs • Consider installing solar panels: while costly initially, this can save thousands of dollars over the long-term
- Water savings: install a water efficient showerhead and only run the dishwasher on a full load
- Only heat and cool the rooms you’re using and use a timer
- Unplug unused electronics • Hang-dry your laundry rather than using a dryer
GROCERIES
While food might be a necessary expense, there are ways to save without compromising quality. Meal planning is a simple way to get better at grocery shopping to reduce wasting food. You could also consider finding recipes that use the same ingredients as you’re more likely to use up an entire bag of vegetables or a fresh bunch of coriander.
You may also want to consider growing your own vegetables (my tomatoes are growing very well!).
PETROL
While we can’t control global oil prices, you can plan clever ways to reduce costs. • Request to work from home a few days a week • Ride your bike to work and get the benefit of a good workout • Use public transport – if you live in a city or town with a decent public transportation system, this alternative is a great option to cut down on commuting costs • Carpool – if you have colleagues who live in the same area, you could split the driving between you.
3. Increase your income
Although there isn’t always a quick or easy way to increase your income, there are options for earning extra cash to cover more immediate expenses. Passive income is a great way to earn money with little effort.
You can also find an extra source of income outside of your 9-to-5 job by:
- renting out a room or parking space
- pet sitting / dog walking
- online tutoring or
- driving for a rideshare service.
Lastly, while it may not be easy to increase your pay overnight, you could consider ways to use your job performance and rising inflation to get a promotion or salary increase.
Questions to consider
If you value the experience of experts in other aspects of your life, don’t discount it when it comes to managing your life savings. A financial coach can help you with all aspects of your financial life—savings, insurance, debt—while keeping you on track to achieve your goals.
- What age can I stop working and retire?
- What strategies can I use to build my wealth?
- How can I ensure my wealth is transferred to my children?