Understanding Inflation and Taking Control with practical steps!

Here are some practical tips and strategies to help you manage your cash flow, reduce expenses, and navigate these economic challenges with confidence.

Over the past year, the harsh reality of an escalating cost of living has hit home for many. The complex roots of this reality lie in the actions taken by governments and central banks during the lockdowns.

They flooded the system with money to mitigate economic pain, lowering interest rates and offering cash rebates. While these measures helped to cushion the blow for some, others still found themselves in dire financial straits.

The aftermath of these measures has left us grappling with soaring inflation rates. While most developed economies have managed to return to pre-pandemic levels, Australia is still dealing with the fallout. Interest rates have crept back to longer-term averages, with little sign of dropping anytime soon. Despite murmurs in the news about potential rate cuts, the hard truth is that such relief seems unlikely until at least 2025.

While recent ABS data shows some moderation in inflation across food and other goods, the cost of housing and rent continues its upward trajectory. This surge is partly fueled by increased demand, spurred on by factors like immigration. As the demand for labour rises, so does the need for housing, amplifying the pressure on prices.

So, what can you do in the face of these economic challenges? As with most difficult situations, getting back to basics is always a good place to start, which includes mapping out your financial framework and making necessary adjustments.

Start by reaching out to your bank. Securing the best interest rates available will ensure you’re maximising the returns on your savings, ideally aiming for rates around 5%.

If you have a mortgage, explore opportunities to reduce your payments by shopping around for better rates or consulting with a mortgage broker.

When it comes to day-to-day spending, adopt a mindful approach. While grocery prices have soared, evaluate options like bulk shopping and watching for weekly discounts at major supermarkets. Consider alternatives like starting a vegetable garden at home and scouting local markets for produce.

Review your existing contracts, such as insurance and other providers, to identify potential savings. Don’t hesitate to negotiate or explore offers from competitors to secure better deals. Also consider options like averaging your payments to avoid seasonal spikes in bills. 

Take a good look at those subscriptions, as they can be a slippery slope because they happen automatically every month. If you have been adding to them over the years, you may be spending hundreds a month without realising it.

If you are in financial distress, don’t suffer in silence. Reach out to your providers, as many have dedicated departments to assist customers. Be proactive and transparent about your situation; they may offer solutions to help ease your burden.

Finally, seek out advice and take proactive steps to understand your finances. Taking control of your financial destiny is paramount in a landscape of economic uncertainty. To help you out Money Mechanics has provided this free cash flow planner — see link below.

FREE CASH FLOW PLANNER

Scott Malcolm is Director of Money Mechanics a fee-for-service business who are authorised to provide financial advice through PATRON Financial Advice AFSL 307379. For more information email This email address is being protected from spambots. You need JavaScript enabled to view it. or call 1300 772 643. The information provided in this article is of a general nature only. It has been prepared without taking into account your objectives, financial situation or needs. Before acting on this information, you should consider its appropriateness having regard to your own financial goals, objectives and personal circumstances.