What to give up to combat the pressures of cost of living

Matt Hearn, financial planner for HPH Solutions, told NCA NewsWire that the first thing to leave out are “unforgettable amenities.”

“You won’t miss them. Unforgettable amenities include delicious dessert with your morning coffee and takeaway or at least the takeaway home delivery cut.”

“Instead of having multiple streaming services at once, sign up for one every three months.”

Finance Quarter director and broker Sean Lee told NCA NewsWire that how people spent money on food was a major factor.

“Some of the quick wins that people can look at to save a little money is to review how often they go to restaurants and use food delivery services, like Uber Eats,” he said.

“Planning meals, sticking to a shopping list, group cooking, and dining can save a couple at least $200 a week.

“Consider replacing more expensive fitness memberships with cheaper alternatives or free outdoor exercise, reduce the use of air conditioners and heaters, and turn off any equipment that is not used often as energy costs are expected to rise.”

Craig MacDonald, of CBM Mortgages, has seen that Australians have begun to worry about rising rates over the past two months. He told Newscorp that the first thing people give up to face the pressures of living costs is eating out.

“Customers are aware of how banks scrutinize their daily spending, so avoiding toast and $5 coffee on weekends are the first things to do,” said the broker, who is based in Sydney’s eastern suburbs.

Edith Cowan University financial planner and lecturer Damon Brown told NCA NewsWire that entertainment and travel are the main expenses people have to cut out if they are struggling financially.

“Particularly travel that involves driving based on fuel costs. The five-hour drive to a campground and things like that — just because the cost of fuel just went up.”

“What was once a cheap vacation… has become a lot more expensive.”

Mr. Brown also agreed that food delivery services should be canceled for anyone trying to save money.

“This is a discretionary element that can be scaled back. We should be better at budgeting for food rather than relying on discretionary purchases.”

“I don’t think it’s a staple that you need to have. I only ordered out two nights ago and it cost me $80…It’s just a mental thing, it just adds something.”

Mr. Hearn cautioned that having all of your money in one account makes it too easy to overspend.

“Reduce the possibility of impulsively overspending by automatically allocating money into a separate account each payment to cover your obligations, such as bills and necessities,” he said.

“Also set up automatic savings for your goals and pay off extra debt. The remaining amounts may be spent on impulses and indulgences.

Eliminate the temptation to spend impulsively by opting out of marketing newsletters, and avoid browsing stores without a set list and budget.

Mr. Lee agreed that having a separate account was a good idea and said it was important for people to budget.

“Record your weekly income, collect your expenses, and calculate the remaining amount, if any, to see if this is enough to meet your annual savings goals. If not, adjust your budget and review your expenses.”

Transfer your weekly budgeted savings to another account to avoid spending that amount.

Pay your credit card in full each month to avoid interest charges or don’t use credit cards at all to prevent yourself from falling into the debt trap.

Cutting spending can be difficult, Hearn said, so people should start with quick and easy steps.

“Look at the direct debit from your account and cut the subscriptions you no longer use,” he said.

Next, switch to the cheaper versions of your current spending habits.

“For example, take your lunch to work instead of buying it, and instead of eating out, connect with friends at home with homemade snacks.

“Use public transportation or escort cars if possible, and refuel your vehicle at the lowest point in the fuel cycle.”

Mr. Lee said he advises anyone with a loan to speak to a financial broker.

“This is usually your biggest expense, so it makes sense to review your loan structure and interest rate,” he said.

“Oftentimes people are paying at least 0.50 percent more annually than they should and on a $600,000 home loan — that equates to $250 a month in interest savings once your home loans are reviewed.

Big banks expect the RBA to raise interest rates by at least one per cent by the end of the year.

“For the average home loan balance, this equates to a minimum $500 monthly increase in mortgage payments — be prepared and budget for it.”

Mr. Lee pointed out that banks were competing aggressively for business, and that they paid to shop.

“Some banks will pay you a discount of up to $6,000 to refinance your loan for them, subject to certain terms and conditions, which can be an added bonus to interest savings,” he said.

Brown agreed that mortgage holders should review their mortgage loans.

“Is it still competitive in the market? Because we often find that if we get stuck in products that are a few years old… there are better products on the market,” he said.

Brown also recommended paying off credit card debt.

“We’re going to see credit card interest rates increase significantly more than just the Reserve Bank increasing rates,” he said.

Brown said that if people are under financial stress, they should feel comfortable talking about it.

“Talk to family and friends about it. Don’t be embarrassed about it because there are a lot of people under financial pressure.

“Historically… for baby boomers, it was all very secretive and they never spoke to friends and family if they were under financial pressure.

“I think we’re in a new era now where financial stress is really common and there’s no judgment.”

Mr Brown said it could save you having to go out with friends and family when you can’t afford it.

“Or if your employer wants to offer you more opportunities to work from home so that you don’t have to incur the costs of driving to work and things like that,” he said.