Be smart with your spending
I really do wish it was a silver bullet or something more sexy than just being smart with your money. However, from our experience managing hundreds of clients across Australia. The ones that are able to accumulate wealth are smart with their spending.
The increasing cost of goods and services is a reality most Australians have to deal with. Data from the Australian Bureau of Statistics shows that living expenses for employee households were up by 2 per cent in September 2018 compared to a year ago. Has your net salary increased to cover for this?
If not, don’t panic. By being organised and smart with your finances, you could manage rising costs without draining your savings.
1. Cut back on major expenses
Trimming your expenses is one of the easier ways to manage the high cost of living. But rather than taking a piecemeal approach, it may be more effective to cut back on some of the largest drains on your earnings, such as food and transport costs.
2. Reduce lifestyle costs
It may be worth auditing your lifestyle costs to see if you could decrease them. While you don’t have to give up all the things you enjoy, cutting down on, for example, your overseas holidays or dining out could go a long way in reducing your costs.
3. Create a budget
Having a budget and sticking to it may help you minimise unnecessary expenses. A budget tracks your weekly or monthly spending and may help ensure you have enough money to cover essentials, build up your savings and handle unexpected or increased costs. You may wish to consider working with a professional financial adviser to create a budget that factors in your income, expenses and financial obligations.
4. Supplement your income
If you monitor your expense at one end then you can also look at ways to increase your income at the other end. In business this is called increasing your JAWS ( The jaws ratio is a measure used in finance to demonstrate the extent to which a trading entity’s income growth rate exceeds its expenses growth rate, measured as a percentage. )
Increasing your income may be another way to ride out the rising cost of living and boost your savings potential. You could take on extra work in your spare time or start a side business. For example, you could become a private tutor in your field of expertise, rent out your spare room, pet sit or get adventurous and try Network Marketing, which is very big. A second income is becoming so popular that it has term…Side Hustle. For some side hustle ideas visit here (not advice and no responsibility taken if it doesn’t work for you…ok?
As you could imagine most of the clients that have been able to accumulate wealth have done it outside of having a 9-5 job. If they don’t become a high paying executive they then start their own business or businesses!
If you have enough savings on top of your contingency fund, you may want to invest to grow your capital and earn interest. Your financial adviser may recommend strategies to help you generate an income from your investments.
The high cost of living may affect your
savings and lead to money-related stress. But if you’re smart about your
finances, you could keep your cost of living in check and remain financially
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 Australian Bureau of Statistics, September 2018, ‘Selected Living Cost Indexes, Australia’. Accessible at: http://www.abs.gov.au/ausstats/abs@.nsf/PrimaryMainFeatures/6467.0?OpenDocument
Disclaimer: The views expressed in this publication are solely those of the author; they are not reflective or indicative of RI Advice Group’s position and are not to be attributed to RI Advice Group. They cannot be reproduced in any form without the express written consent of the author.