Inflation is on the Rise: Here’s How to Prepare Your Finances 

May 19, 2022
inflation

The cost of living is rising at its fastest rate in more than a decade, and the inflation rate has hit a whopping 5.10%. Instead of watching this happen and feeling helpless about it, there are plenty of ways you can prepare for, and beat, rising inflation. 

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1. Figure out where your money is going 

As the cost of living goes up, you’ll be spending more money on everyday items than you were last year. So it’s important to make sure you’re not spending money on things you don’t necessarily need to be. 

Take a look at your last few months’ worth of expenses and work out exactly where your money is going. How much are you spending on groceries, eating out, weekends away, subscriptions and general retail therapy? 

By looking at all your transactions, you’ll be able to spot areas where you can cut back and save going forward. 

2. Try to increase your income 

inflation

With a rising inflation rate, unless you also increase your income, your money will be going backwards. This is because your money can buy less today than it could last year. Inflation of 5.1% means, on average, you need $105.10 today to buy what $100 bought you 12 months ago.  

To combat inflation, you need a pay rise that matches or exceeds the inflation rate. If you haven’t asked for a raise this year, it’s a good time to do so. To work out the pay rise you need based on your salary, aim for an increase of at least 5.10%. 

If you’re unable to negotiate a pay rise, get creative with other ways to bring in more money. Perhaps you have a spare room you could rent or a car that you could add to a car-sharing service? Selling household items you no longer use online is also a good way to bring in a bit of cash while also decluttering your home. 

3. Get your money working for you 

woman holding Android smartphone

Money just sitting in a bank account isn’t doing anything (actually it is – it’s going backwards!). If you don’t already have one, consider opening a high interest savings account to earn a return on your savings while you’re not using the cash. Savings accounts offer returns of up to 2% p.a., which is still lower than inflation, but these products have no risk. 

If you’re comfortable with higher risk for the potential for higher returns, you could consider investing in an index fund or shares. Just keep in mind that, while these aim for better returns over the long term, these are high-risk investments that could experience volatility in the short term. So don’t invest money that you need to access soon (e.g. for a house deposit). 

For something in between, Finder Earn offers a return of up to 6.01% for deposits of up to $100,000, with interest paid daily. You can withdraw your deposit at any time, so this can be used as a short-term or long-term investment option. 

4. Switch and save where you can 

man and woman talking in front of gray tabletop inside shop

Now is not the time to be overpaying for any products and services (actually, it’s never a good time for that!). Some of the biggest savings can be made by looking at the various financial products you pay for and seeing if you can switch to another provider. 

Set yourself some time this week to compare everything from your home loan (and refinance if you find a better deal), your health insurance and your energy bills to your mobile phone plan and even your super fund

Yes, these tasks are often put in the “can’t-be-bothered” or “too-hard” basket, but you can literally save yourself thousands of dollars by getting it done. 

Need more financial advice? 

Browse our finance category. It’s chock full of hacks and advice from industry professionals. And remember to download the Soho app for quicker browsing and property matching. It’s getting you into your dream home faster!

Alison Banney
Alison Banney is the banking and investments editor at Finder. She has written about finance for over 8 years, with her work featured on sites including Yahoo Finance, Money Magazine and Dynamic Business. She has previously worked at Westpac, and has written for several other major banks including Greater Bank, bcu and Gateway Credit Union. Alison has a Bachelor of Communications from Newcastle University, with a double major in Journalism and Public Relations. She has ASIC RG146 compliance certificates for Financial Advice, Securities and Managed Investments and Superannuation. Outside of Finder, you’ll likely find her somewhere near the ocean.
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