5 ways to prepare your finances for inflation

Posted: 13 April 2022 3:11 pm
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There are a few things you should be doing to keep on top of your money.

Everybody knows the feeling. You think you've got plenty of money left in your bank account to spend, but there's a nasty surprise when you check your balance.

Where did all that money go? You were so good this month.

Then you look back through your statement and see lots of small transactions that you didn't think would be a problem. How did a $4 cup of coffee turn into $90 by the end of the month?

Those occasional spends you don't think will have much of an impact tend to be our biggest downfall.

But you're not alone. ANZ research shows that 78% of Australians have what they coined "spenemies". This results in $1.2 billion extra being spent per week mostly on food and drink, impulse purchases and entertainment.

Perhaps unsurprisingly, millennials are the worst culprits. They spend on average $4,311 per year on their spenemies, with 1 in 2 saying that impulse purchases are the biggest problem.

Highlighting the importance of keeping on top of your finances and goals, ANZ financial adviser Liana Cauchi says it's not just enough that spending habits have changed thanks to COVID-19, but the rising cost of living is making things more difficult.

We know people are spending more. Retail turnover in February was up 9.1% year-on-year.

However, inflation is also expected to hit 4.25% this year. We're already seeing the cost of goods rising along with that (rising petrol prices has been a big talking point so far this year).

Surgical Extraction

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To combat the increasing pressure, Cauchi says there are a few simple things people can do to manage their finances:

1. Know what's going in and out

Being across what money is going into and out of your account is important to budgeting appropriately. This also helps you to avoid Cauchi's biggest warning against spending more than you earn.

2. Work out essential expenses vs discretionary spending

Cauchi says that there are many non-negotiable expenses, such as rent, food and other bills. But there are many non-essential expenses you pay throughout the month. Work out what outgoings need to go out and what you may cut.

3. Understand your emotional spending cues

If you know there are triggers that push you towards impulse purchases, think about those. Cauchi says that if you tend to head to the shops on the way home after a stressful day at work, try to change that behaviour. Instead, go home and read a book.

4. See if you can cut memberships/subscriptions

Like working out what your essential expenses are, Cauchi says to "get back to basics". Prioritise saving at least 10% of your salary and paying for your essential bills, and then working out what you can do on top of that. Unused gym memberships or streaming services are a great place to start.

5. Use tools and apps

There are so many tools out there to help you with your budgeting. ANZ has developed Your Money Report, which categorises an account holder's spend throughout the month so you can see where the money is going out.

"It used to be that we sat down with an Excel spreadsheet and it was an arduous task, but this report can be downloaded with the click of a button," Cauchi says.

Apps such as Finder's free app can also help you to see all of your money in 1 place even if it's across different accounts and investments.

Want to work out how to make the most of your savings? Compare savings accounts with Finder.

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