Financially, times are pretty tough – and they’re not expected to get much better any time soon.
Reserve Bank Governor Philip Lowe says a recession is not in sight in Australia. Others reckon we could be hit by a brief recession sometime next year.
But one thing is certain at the moment: millions of Australians are suffering from the rising cost of living.
So how can we prepare for tough financial times? We asked three experts.
First of all, you should know that you are not alone
Before we get into that, National Debt Helpline financial advisor Deb Shroot says no matter how bad things get financially, there are always options. Even if it looks really bad.
“When you talk to a financial advisor, there are always options,” she says.
Basically, financial advisors are professionals who help people in financial difficulties and their services are non-judgmental, free, independent and confidential.
“The options may not all be desirable, but we can explain all the pros and cons to you,” says Ms. Shroot.
“Then you can decide what the next best step is for you.”
She says it’s important not to wait to ask for help.
“The sooner you commit to get help, the more options you have.”
She says people from all walks of life have been seeking help in greater numbers following February’s rise in gasoline prices.
“So we get contacted from all different walks of life, people in all different, different situations,” she says.
Start preparing now if you haven’t already
According to financial planner Olivia Maragna of Aspire Retire, you should get your finances under control as soon as possible.
She says it’s one of the best ways to avoid future pain.
That’s because things can easily get out of hand in front of people Take steps to get your finances under control.
“People – who don’t necessarily deny it because they know it’s going to get worse – put it off until later before actually tackling the problem,” Ms Maragna says.
“You don’t want to be in a position where you’re forced to do something.”
Talk to your bank about your mortgage repayments
Ms Maragna says mortgage holders should do so Talk to your bank and negotiate a lower interest rate when they feel the pressure for rate hikes.
She says clients recently managed to get a 0.4 percent drop in interest rates.
“I’ve found that where customers have done this, they’ve gotten a better interest rate, at least a good 0.4 percent drop in their interest rate,” says Ms Maragna.
“That doesn’t change the bank, it just calls for a better course.”
She said those with mortgages should also contact their bank if they’re having trouble making repayments.
“Banks generally have processes for people who are in financial distress,” she says.
“They’ll just walk you through the process, maybe put you on a payment plan or help with interest rates or things like that.”
Writing down your budget can help you stay in control
It might be tempting to put it off for a few more months, though organization of your budget can make you feel like you have a good handle on things.
So says Di Johnson, an associate professor of personal finance at Griffith University.
“Planning expenses, documenting expenses and debt can help give you a sense of control,” says Dr. Johnson.
“Writing down your current expenses in terms of daily household expenses and any debts – mortgages, personal loans, credit cards, buy now pay later, payday loans, loans from friends and family – can help with planning by simply documenting it to see what’s already covered and priorities to pick at others.”
Check out what you can reduce
Once all of your expenses are listed in your budget, Ms. Maragna says it’s a good idea to go through each item and look for a better deal.
This includes services such as electricity, internet, gas and subscriptions including streaming services and gym memberships.
“Don’t wait for interest rates to riseit’s a question of ‘Where can we actually save?’” says Ms. Maragna.
“Check the health insurance, see what you can cut or reduce. Call each provider to see what you can reduce.
“There doesn’t seem to be any relief anytime soon. This is something for the next six to 12 months that we should consider the new norm.
“Look at every dollar that goes out the door.”
Split large payments into regular parts
“Smoothing out” major annual payments like car registration or insurance and setting up monthly direct debits can give you a clearer picture of your finances, Ms. Maragna says.
dr Johnson agrees. She says it also relieves regular expenses.
“So you can think more clearly about bigger goals,” she says.
Find more income through odd jobs and second-hand sales
Saving costs is all well and good. But in harder times, people have to resort to searching for extra income.
“I think people really need to resort to, you know, looking beyond what you would normally do in difficult times,” Ms. Maragna says.
She said selling available second-hand items is a great way to make “a few extra bucks.”
And then more paid work is sought, including through online platforms and applications.
“Even the gig economy in terms of people wanting some extra cash,” she said.
“You know, you can jump onto a lot of these platforms now and Work weekends and make a few hundred dollars more on a weekend.
“So I think people just have to explore all options to stay ahead. Because like I said, we’re not at the end of the bad times, there’s more pain to come. It has to be approximate Think outside the square.”
Going into debt is not a solution
Taking on debt to cover budget deficits is one of the most common ways people get into financial trouble, says Ms Shroot.
“For example, someone can’t afford their electric bills, so they might get a loan. We usually find it This sets in motion a so-called debt spiral,” She says.
“There is a high probability that you will not be able to repay this.
But when you have hungry kids, need to keep the internet on for homework, or need gas to get to work, Ms Shroot says it can be easy to overlook the dangers of higher debt.
“If you have to feed your child, you will do whatever it takes, even if there are consequences later,” she said.
“So I think our message for that is to seek help because there is emergency help.”
She says every state and territory has emergency relief programs.
“Where people can access fruit and other coupons to meet those basic needs,” she says.
Savings are important. Though it’s easier said than done
It would be great if everyone could snap their fingers and have a healthy savings account.
But have Cash is the key to navigating uncertain financial timessays dr Johnson.
“While it’s easy to say ‘ideally you have a savings buffer for three to six months of expenses,’ we know that’s not always realistic,” says Dr. Johnson.
“Many people have struggled with cost of living pressures for years, some for decades, and even as average household savings rise, there is a wide gap in income and wealth equality in Australia.”
Ms Shroot says a three-month savings buffer is good general advice, adding that many people who turn to financial advisors have recently experienced an unexpected change in circumstances.
“You’re definitely going to be a lot better off because you don’t know when those times are going to come,” she says.
“Rough advice is that it would be good to have three months’ worth of expenses, understanding that some people can’t afford to put money aside and just live paycheck to paycheck.
“It could, it could be really difficult. We don’t want people to feel bad or failed when they are unable to do so.”
It can help to talk to someone about your financial difficulties
Ms Shroot says it can be difficult to talk openly about your personal finances, especially when times are tough.
However, she says that talking about it can ease some mental stress.
“Some people feel a sense of failure when they are unable to provide for their families or ask for help when it comes to money,” she says.
“So even just unload for your mental well-being, It is very unlikely that you will not feel better after speaking to a financial advisor.”
“Speak to a financial advisor, we’re free, independent and confidential. Even if it’s just a matter of bouncing off an idea, we’re always happy to listen and even help people process their money-related thoughts.”
This article contains general information only. You should consider seeking independent professional advice regarding your particular circumstances.