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Inflation hits a shocking 5.1%: Here’s what it means for your money right now

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A surge in inflation is bad news for consumers. Here's how high inflation rates will impact your finances this year and what you can do about it.

After months of predictions as to what the inflation rate will be for 2022 so far, the official figures are out and it's much higher than expected. The official inflation rate for the March quarter of 2022 has been confirmed at 5.1%.

This is a big deal as it's the highest inflation rate we've seen in a decade and the biggest jump in inflation for over 2 decades. The RBA aims to keep the inflation rate around the 2% point, so this is much higher than the ideal.

What a 5.1% inflation rate means for your money

This is bad news for all of us as the cost of living continues to increase. However, there are things you can do to help protect your finances from inflation. Here's what a 5.1% inflation rate means for your money and some tips to keep up with surging living costs.

The cost of everyday items has gone up

Inflation measures how much the cost of living has risen. The figures out today have confirmed that, overall, the cost of living has increased by 5.1%. This means you're now paying more than 5% more for your everyday items including groceries and household essentials compared to this time last year.

You've probably already noticed this, particularly with surging petrol prices. The increased costs are here to stay, and in fact, could continue to climb even higher as inflation goes up throughout the year.

What you can do:

  • Look at your spending and see where you have capacity to cut back.
  • Switch to cheaper options like Aldi and home-brand items to save money.
  • Consider cutting back on some luxuries such as takeaway and eating out.

If you'd like more inspiration, here are 50 ways to save money on everyday items, products and services.

Finder expert Sarah Megginson weighs in: Would increasing the minimum wage make the cost of living crisis better or worse?

Your money in the bank is going backwards

As the cost of living goes up, the value of your cash is going down. If you've just got your cash sitting in a bank account, it's actually going backwards. You need to find ways to make your money work harder for you as inflation rises.

What you can do:

  • Put some cash in a high interest savings account (these rates are still lower than inflation, but a savings account is a useful product if you don't want to risk your balance in the share market or elsewhere).
  • Consider investing extra money into an index fund or adding it into your super via salary sacrifice.

Your buying power has gone down

If your income stays the same as what it was last year, your buying power has gone down and you've effectively had a 5.1% pay cut. This is because, as the cost of living increases, your money will buy less than what it did last year.

What you can do:

  • Find out the pay rise you need this year for inflation and speak to your employer about how to make it happen.
  • If you're unable to get a pay rise, look for other ways to increase your income such as a side hustle, extra casual work or joining the gig economy.

Your home loan rate is about to rise

With inflation rates surging, economists are saying it's almost certain the RBA will raise the cash rate. With a rise in the cash rate comes a rise in home loan rates soon after (the big 4 banks are already predicting a rate rise). This means your home loan, unless it's fixed, could rise significantly this year and your monthly repayments will increase.

What you can do:

  • Compare home loan rates and refinance to a better deal.
  • Consider locking in your rate with a fixed rate home loan ahead of the rate rises.
  • Use an offset account to reduce your interest repayments.

We can help you keep up with rising inflation. Here's how to beat petrol prices, the pay rise you need for inflation and 50 ways to save money right now.

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