From crunch to control: navigating the rising cost of living

Some of the information in this article may be out of date. We are currently in the process of updating our content to reflect FY26 details.

In today’s increasingly challenging economic landscape, one issue casts a significant shadow over individuals and families alike: the rising cost of living. And it doesn’t matter whether you’re a low, middle or high income earner, everybody is feeling the pinch.

At First Financial, we know our clients are concerned about the current economic climate and how it will impact them now and on their pathway to wealth.

Although complex, you can navigate these times and come out financially secure on the other side.

The term ‘cost of living’ refers to the amount of money required to sustain a certain standard of living or lifestyle in a particular location. It includes all expenses that cover basic necessities, such as housing, food, transportation, healthcare, education, taxes and other essential items.

So, when we say the cost of living is high, it means the necessities of life are costing more than they used to.

When quantifying the cost of living, one of the key indicators is the Consumer Price Index (CPI). The Australian Bureau of Statistics (ABS) calculates the CPI, which provides a clear indication of the inflation rate by measuring the changes in the price of goods and services over time. According to the ABS, the monthly CPI indicator rose 5.6% in the twelve months to May 2023, and the most significant price rises were housing (+8.4%), food and non-alcoholic beverages (+7.9%) and furnishings, household equipment and services group (+6.0%).

Managing high inflation and the high cost of living can be challenging on any income, but it isn’t impossible. It requires discipline, careful planning and a willingness to adapt. If you want to prioritise your financial wellbeing in these difficult economic times, here are a few tips to consider.

When it comes to having a budget, it’s not enough to just have one, you’ve got to stick to it. Your budget should outline your income and expenses. Prioritise your essential items and allocate funds to them first.

Track your spending. Over time, this will help you identify where you might be spending too much money. Cut back in these areas and adjust your budget accordingly.

Reduce discretionary spending. If the budget is tight, there will be minimal room for non-essential purchases such as entertainment, dining out and more. Don’t give up on fun and leisure completely, but perhaps consider a more frugal approach, such as free or low cost alternatives.

Wherever possible, find cost-saving opportunities. Whether it’s everyday expenses or you need to replace a household appliance, look for sales and discounts. For perishable items, consider buying in bulk. For utilities, insurances and other regular expenses, compare prices across the market to ensure you are getting the best deal. Be prepared to switch to another service provider if that’s what it takes to save.

Despite the current financial challenges, it is essential to consider the future and plan accordingly. Set aside a portion of your income for an emergency fund and long-term savings. If you want to grow your wealth over time, investing is vital. We recommend speaking with your financial advisor about investment opportunities that align with your goals and risk tolerance.

Sometimes, the only way to maintain a certain lifestyle is to find a way to increase your income. Tough times call for creativity, and the economic uncertainty of recent years has fuelled the rapid growth of the gig economy. A side hustle is a great way to supplement your main income. Can you do something freelance? Do you have a skill you can teach to others? The possibilities are endless.

Also, consider whether furthering your education or expanding your qualifications could potentially increase your income. This could be an opportune time to grow within your current field.

Every individual, couple and family is different and so is their financial situation. That’s why seeking personalised financial advice is always a wise move. At First Financial, we recognise the importance of thoughtful planning to prosper in a high-cost living environment. We offer our clients tailored plans and strategies that align with their goals.

Our passion is helping you retire when and how you choose, even when the cost of living is high. We can guide you in making smart decisions with your money that will accumulate wealth and allow you to thrive in the years ahead.

While we don’t have a crystal ball, we do know that inflation doesn’t last forever. It varies over time, influenced by factors such as economic conditions and supply and demand dynamics. The current surge in the cost of living will not persist indefinitely. However, the exact timing of when things will begin to improve remains uncertain.

Right now, the rising cost of living is affecting everyone. Most of us, regardless of income, have to make adjustments to our lifestyles. However, we can emerge on the other side financially secure and ready for retirement.

The old adage, “Tough times don’t last but tough people do,” applies here, with a slight tweak. Tough economic times don’t last, but people who plan, budget and strategise do. These are the people who will continue to build wealth and be prepared to retire life ready.

Our financial advisors have years of experience in assisting clients navigate tough economic times, including the rising cost of living.

Talk to a member of our experienced team and start securing your financial future today.

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