Money 101: How to survive and thrive during this cost of living crisis

The cost of living is insanely high. Electricity and gas prices have leapt exponentially. Most of Australia’s electricity is still being generated through coal fired power plants. As some of these facilities are aging and undergoing planned and unplanned repairs, this has taken out supply from the power grid and gas fired power plants have stepped in to fill the supply gap. With the Russian invasion of Ukraine, many countries have banned Russian gas imports. As those countries seek other gas suppliers, Australia actually exports around 80% of its gas, to take advantage of higher international prices. Higher prices, means huge profits for these gas companies, leaving Australians subject to the volatility of international gas prices.

Higher costs for energy, means transporting goods is more expensive and those costs get passed on to consumers. Higher costs for energy, also means more money going out of your bank account to pay for electricity, gas and petrol. Unprecedented natural disasters have wiped out crops. With less supply, prices for fresh produce have increased – the humble lettuce reached sky high prices of $12 at one point! Even potatoes are currently in short supply and some mum and dad fish and chip shops have had to shut due to insufficient supply of chips!

It’s a landlord’s dream market with rent rises of 20%+, unfortunately not uncommon. Lines of hopeful renters are duking it out to find a suitable home. It’s no wonder inflation is skyrocketing and the Reserve Bank has hiked up interest rates 10 consecutive times to curb it, meaning mortgage repayments have increased dramatically too.

Not all of the recent price rises can be attributed directly to inflation. Businesses are most definitely, taking advantage of customers in this high inflationary period and hiking up the price of their products even more, gouging a healthy margin on top. Woolworths supermarkets recently announced a half yearly profit of $907 million, which was up 14 per cent on the year before which is most definitely higher than the current 7.4%. Similarly with Coles, they recently announced a $643 million profit, which grew by 17.1 per cent compared to last year.

To describe the current situation in one word, clusterfuck seems pretty apt. How are you supposed to manage your money when your wallet is being pulled into so many different directions? Join me, as I walk you through different areas of your financial life to help you develop financially responsible habits and ease the stress from this current cost of living crisis.

Track income/expenses – what gets measured, can get improved

With the ease of debit and credit cards and the ability to store your cards on your phone, it’s easy to just mindlessly tap your card/phone and not actually know how much money you’re spending. Get into the habit of tracking your income and expenses, including any discounts or savings you’ve gained. E.g. if your friend paid for your lunch, supermarket savings, discounts, petrol savings etc. With this information, you’ll be able to gain insights and see trends into which categories you’re spending most on, what categories you can cut back on, what (free) value you’ve received and feeling the abundance flowing through in your life.

If you’ve got a regular salaried job that involves a regular paycheck every fortnight or month, it’s pretty easy to track your income. If you have a side hustle or freelance gigs, it’ll require a bit more discipline to track irregular amounts of income. Make it a regular habit, perhaps once a week to track it all. Every bit adds up!

Similarly, conduct a financial audit of all your expenses.

What are the fixed expenses you have to pay every month/quarter?

• Rent/Mortgage/oc bills/special levies/council rates
• Electricity/gas/water bill
• Internet/Mobile
• School/university fees
• Groceries (there is a portion that can be discretionary – more on this in a section below)
• Public transport/Car/petrol
• Rental/home/health Insurance etc

More later in this post on how you can decrease some of these fixed expenses.

What are the discretionary expenses you pay every month?

• Entertainment streaming services
• Magazines/newspapers
• Shopping
• Eating out
• Ordering take out etc

In between Netflix, Binge, Foxtel, Amazon, Paramount, HBO, Stan, Disney+ etc – there are so many streaming services. Cut down or cut them all out. Same story with physical magazine and newspaper subscriptions. Your local library is an underutilised resource. They often have links to online magazine/newspaper/movie/tv subscriptions that you could access for free – all just for signing up for a free and humble local library card.

If you’re signed up to a gym membership, but you never attend, can you cancel and switch to free Youtube videos or join a local sports club or do other free outdoor activities (cycling, hiking etc)

Treat eating out or ordering in, as an actual treat – something you do very occasionally and consider learning to cook more. It’ll be healthier and you’ll save money. More on this later in the post.

A quick and easy guide should be to spend 50% of your net income on essentials such as housing, utilities, healthcare, 30% on fun and 20% savings. This is of course, only a general rule of thumb and the allocations may change depending on what your life circumstances/goals might be.

Groceries

When it comes to saving money, food expenses can add up quickly. One way to combat this is by planning your meals and grocery shopping strategically. Always make a shopping list and check what items you already have in your pantry. This way, when you’re shopping, you’re not tempted to sway from your list and buy things you don’t really need or buying duplicates. If you plan the meals you will cook for the week, this shopping list will help you not to buy food you won’t eat and end up tossing in the bin. Similarly, don’t shop while you’re hungry. You’re more likely to reach for junk food.

Doing your weekly grocery shop in one supermarket is convenient, but you pay for that convenience. You’ll also find prices in Coles express and Woolworths metro to be about 10% higher than their regular suburban supermarket counterparts. There’s no such thing as a free lunch! Anything pre-chopped (fruit), washed (salad), diced (vegetables) etc will always cost more than the natural, whole item as nature intended. For time poor people this may be good for them, but if you can spend a bit more time washing and chopping yourself, you’ll be saving yourself money, not to mention less plastic to get rid of.

Supermarkets typically sell their fresh produce at higher prices than smaller greengrocers and larger fresh produce markets or local farmer’s market. To save on your weekly shop, consider switching where you shop. I live in Melbourne and have shopped at Footscray market, Preston Market and Queen Victoria markets. With so many competing stalls, prices are more competitive (and cheaper than the big name supermarkets), produce is fresher and lasts longer than produce from supermarkets, it’s a win-win. Towards closing time, usually a lot of stalls will discount their ripe produce too.

For other household staples or pantry items, consider visiting your local chemist or even The Reject shop. They might offer more competitive pricing on cleaning products, laundry detergent and other household goods. For the big supermarkets, flick through their websites to see what they might have on special that week.

Consider switching shopping exclusively from the Big 2 (Coles/Woolworths) supermarkets and shopping from Aldi, local independent supermarket, local butcher, local greengrocer etc. Comparable items are often cheaper, with no real discernible difference in taste or quality. If you still must shop with Coles or Woolworths, consider switching to choosing to their home brand. We’re lucky in Australia to have high quality home branded products.

Shop the ugly (odd shaped) vegetables section and in season produce. With greater supply, often comes decreased prices. You may also consider switching to buying snap frozen vegetables and fruits as opposed to buying fresh as a more affordable alternative.

The freezer is your good friend. If you have multiple mouths to feed at home, buy items in bulk. Freeze smaller portions, that you can use at a later time.

For when you’re just too tired or lazy to cook, have a stash of frozen meals on hand. That frozen pie, lasagne, or pizza might just do the trick and save you from spending on takeout.

Don’t forget to look at the cost per unit e.g. per 100g/100ml etc. This will help you compare like for like so you can see where you can get the best value for your money

Batch cooking meals

Since starting batch cooking a few years back, it has been life changing. I’m saving more money, eating healthier, gathered a revolving collection of yummy and easy to cook, go-to recipes and not wasting any food I buy each week, as the exact amount I buy is the exact amount I need for the meals. This way, I’m not buying a random assortment of food, coming to the end of the week, when the produce looks kinda old, saggy and scraggly, then opting to order take out from ubereats and eventually chucking my groceries (and hard earned money) into the bin.

Yes, batch cooking, especially if it’s just for yourself, does mean you’ll be eating the same thing for a few days, but at the same time, who wants to cook a meal from scratch at the end of a long day at work? If you batch cook at least 2 different recipes, you’ll at least have 2 different types to alternate between. With batch cooking, you know a hot and hopefully nutritious meal is waiting for you in the fridge when you get home. All you’ve got to do is re-heat it. Your body will thank you and so will your bank account.

Pay down credit card/zip pay etc as fast as you can

Credit cards are a wonderful invention, they can help you build up your credit score and be awfully convenient. They’re often linked to various rewards including cash back offers, complimentary travel insurance and concierge services, contribution to frequent flyer points, point bonuses upon sign up depending on reaching the minimum spend in the first 3 months and so much more. But the ease of access, can leave some people in crippling debt, with interest rates of 20%+ if you don’t repay the full amount at the end of the billing cycle! Best practice is to pay off your entire balance each month to zero, that way you’re not accruing any unnecessary interest.

If you have built up some credit card debt, make a plan to pay it off as soon as you can. This could mean really tightening your spending, taking on a second job, extra shifts, starting a side hustle etc – whatever you need to do to pay it down as fast as you can.

Similarly with zip pay, after pay, Klarna etc – such easy access to fast credit often encourages consumers to spend beyond their means. A financially responsible motto to live by is, if you don’t already have the money, either save up to buy it, or don’t buy it at all.

Despite the use of credit cards being helpful in building up your credit score, if you’re thinking of applying for a home loan in the near future, banks actually look negatively towards credit. They view the entire credit card limit as liabilities, that may take away your ability to service their home loan. For example, say you have 2 credit cards, both with $5000 limits. Even if you only spend $2000 on 1 card and repay it in full, the bank still views it as a potential $10,000 liability and not just the amount you spend up to. Generally banks or mortgage brokers will ask that you close down as many credit cards as practicable to maximise the amount you can borrow.

Cash envelopes

With the onset of COVID, people are using less cash, with many business having gone completely cashless. To add an extra step in your money mindfulness, revert to cash envelopes. It’s literally an envelope (or a dedicated wallet), where you withdraw a certain amount of cash each week and you only use that cash to purchase things, the use of cards is not allowed. There’s something visceral about seeing the physical money spent. This way, you’ll avoid having to pay card transaction fees (which seems to be a common thing the customer pays in Victoria, but seems to be borne by businesses instead of the customer in NSW (but maybe they just incorporate that into their pricing anyways.)

Spending a finite amount of cash, means you’ll know exactly how much you’re spending instead of mindlessly tapping your credit/debit card – which can be hard to keep track of spending. How do you determine how much cash to withdraw each week without overdrawing and overspending? That’s why you need to track your income and expenses, so you know exactly how much money you’re earning and how much you’re spending!

Yes, it is true, some businesses display signs that they longer accept cash… but maybe that just means, you take your hard earned cash elsewhere and spend it with another business instead that would happily accept your cash. Their loss, another business’ gain.

Savings

There is power to living below your means and not spending just to keep up with social media trends or what your friends/family/neighbours are doing. Having savings gives you choice and I like splitting savings into different buckets, which I’ll go into deeper detail below.

Fuck you fund (3-6 months of expenses)

Having money gives you options to tell others to fuck off. LOL. Let me explain. Say your company has fired a lot of people and your workload has increased dramatically and your mental health and physical health is suffering. If you have a fuck you fund, it gives you the option to quit your job, maintain/salvage your sanity, regroup and have enough money to pay the bills, until you find a new job. Without this little pot of money, it might mean, staying in that job, where your mental health and physical health keep declining, as you have no other choice.

Emergency fund/rainy day fund (1-2 months)

Similarly, you may want to put a smaller stash of money away as an emergency fund. This pot of money could be used in one off emergencies such as your car/washing machine/air con etc needs urgent repairs, you need to urgently fly somewhere to visit a loved one who has fallen ill, you’ve just been dumped by a partner and need to move elsewhere etc. Basically money that needs to be used for an urgent, unexpected situation.

Sunny day fund

On the flip side, you should strive to save a pot of money that can you spend guilt free! This could be 10% of what you earn. This is money specifically put aside just to do fun things like holidays, weekend trips, concerts, new books etc. Not to sound morbid, but we never know how long our life may be, every day is a gift and we should find small ways to enjoy the small, everyday moments. There’s no point in sacrificing everything and waiting until your retirement years to “enjoy life” when in reality, no one knows if you’ll even reach retirement age. Some things you may want to spend your sunny day fund on:

• Everyday luxuries – coffee (hopefully in your own keep cup/mug!)
• Occasional dessert treat
• Monthly new book
• Weekend trip with friends
• Trip regionally/interstate/overseas

Loyalty does not pay

When it comes to tightening your budget, loyalty to your current providers and services may not always benefit you. Once a year, it pays to sit down and shop around, compare prices with other companies to see where you can save money on your essential bills. This includes things like your electricity, gas, internet and mobile providers, health insurance, rental/home/car insurance. Ring your current provider to see if they can offer a more competitive deal than the current one you’ve got. You might find that the competition offers a better deal for the same or similar service.

For electricity – on a day to day level, you can turn off devices that you’re not actively using. This could include things like your TV being on standby, microwave, coffee maker etc – even if these devices are not technically “on”, even if the power outlet is switched “on” these silently still drain electricity and for the whole year could contribute up to 15% of your entire power bill! For devices that you’re not actively using, switch the power outlet off completely.

Seal up gappy windows and doors to keep the cool air or hot air in or adding in better insulation or upgrading existing appliances to more energy efficient ones. Do you have block out blinds/curtains to keep the heat out? Can you use appliances during off peak times? Can you run washing machines when you’ve got enough for a full load and use cold water?

Once a year, compare your current energy plan to see if it’s the most cost effective and if not, consider switching to a better deal with a different provider. Sometimes, a simple phone call to your existing provider, just to ask if they have any better deals they can provide you, may do the trick to keep you with them and save you money at the same time.

The easiest way to find the cheap deals is to use the government websites:

• In NSW, SE Qld, SA, ACT &; Tas: www.energymadeeasy.gov.au
• In Victoria: www.compare.energy.vic.gov.au
• In WA: switch gas at www.wattever.com.au

Internet access and mobile phones have become daily essentials. It’s common for internet providers to offer no lock in contracts, so switching internet service providers (ISP) has never been easier. So me ISPs offer bundle packages with internet and mobile, that could save you further money – always check the fine print before committing.

Investing

Given our society is so open to talking about sex and religion, it seems almost ironic, that money is still such a taboo topic, even among good friends. I do not pretend to be a financial advisor, so it’s important to speak to someone who can give you specific advice for your financial situation.

A dollar invested today, is worth more tomorrow, so the earlier you start investing and building up that egg for retirement, the more time it has to marinate with the magic of compounding interest! Depending on your risk appetite, you may want to look into some of these investment categories:

• Exchange traded funds
• Shares
• Bonds
• Property

Here’s some other resources I’ve personally used and recommend:

• The Financial Diet
• Money magazine
• Unf*ck your finances by Melissa Browne

Home Deposit

Two-thirds of Australians are homeowners. So it’s a no brainer which group of people, our politicians try to look after in order to try and keep their job. This leaves one-third of people facing a massive uphill trek, where the current property and relevant tax laws and housing climate is so entrenched to benefit existing homeowners. Property is expensive and the pandemic turbocharged property prices to record eye watering levels. Although the Reserve bank has hiked up interest rates 10 consecutive times, this has softened the market slightly, but on the flip side, this has not actually made property more affordable, as buyers cannot borrow as much.

If your goal is to buy property, educate yourself about the process and the current market conditions. With average unit prices in capitals such as Sydney being $750,000 and in Melbourne being $560,000, and average house prices in Sydney being $1.4million and just over $1 million in Melbourne, it’s time to really hunker down, examine your finances and see in what areas can you tighten your spending and what ways can you increase your income to save up for your first home deposit?

How can you increase your income and put more money towards saving for a deposit?

• Can you change jobs that commands a higher salary?
• Do you have other skills where you can start a side hustle or freelance to bring in extra money?

It is strongly not advisable that you put your hard earned home deposit money and “invest” the money in extremely risky things like cryptocurrency. “Investing” in crypto is pretty much gambling. You should only ever put money into crypto if you are OK to lose all of it. Your home deposit is much too precious to be taking on that level of risk, so should only be safe guarded in a high interest savings account.

In what areas can you cut down on your spending to fast track your savings towards a deposit?

• Are you able to move back home with parents or into a share house instead of living on your own, to save money on rent?
• Can you eat out less and cook more at home?
• Can you drive less and start using public transport more?
• Examine your bills (electricity/gas/water/internet/mobile etc) – can you shop around to see if other comparative providers have more competitive pricing/services?
• Are you a habitual shopper and fashion lover? Have you considered doing a clothes swap with friends, shopping second hand at curated markets and/or thrift shops instead?
• Challenge yourself to a 30 day no spend challenge! (Apart from paying for essentials etc – consider not spending on extraneous “want” items for a month or more)

Once you’ve saved enough for a deposit, congratulations! Banks love to see that you’ve got the willpower and stamina to save, as that typically gives them confidence you’ve got good savings habits in order to service their loan. I’ve recently been able to step onto the property ladder and bought my first apartment in Melbourne. Read my post on my buying experience and learn the next steps in your home purchasing journey for next steps!

I hope this money 101 guide gives you a framework in which to think about money and use it to make smarter financial decisions – especially during this current cost of living crisis. We all need money to live, but we shouldn’t live to just work, so it’s important to learn the rules so you can arm yourself with good financial knowledge to set up your future self on a strong and healthy financial path. Remember, it takes effort and discipline, but the rewards are worth it. Good luck!

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