Is The Cost of Living Out of Control?

Posted on August 20th, 2013 · Posted in News

“Cost of living pressures” has become a common catchcry of the election campaign from both sides of politics. While gas, electricity and childcare costs have risen steeply, there are other costs that have fallen and the consumer price index is historically low.  In the past year, the cost of food has risen just 1.1%, petrol is down 3% but wages are up 3.1%.

It makes us wonder whether “cost of lifestyle pressures” are just as damaging to the household budget and accentuating the overall financial pressure.

The way we spend money, and what we spend it on, has changed quite dramatically over the generations.  While energy and childcare costs have risen, car prices are at their most affordable since the 1970s, as are airline tickets. Costs of electronic items such as TVs, sound systems and gadgets have never been cheaper.  But look at what you spend your money on now and compare it with years ago. That’s where the financial pressure is coming from.  Telecommunication costs are a lot higher, with increased usage and data downloads from smartphones, tablets and high-speed internet.  Are you amazed at the number of cafes popping up in building foyers and street corners? That’s because we don’t use the instant coffee in the staff kitchen anymore.  While general retail sales have been flat for a couple of years, one of the few growth areas has been takeaway food as we buy more family meals per week rather than cook our own meals.  Then there are trends such as destination weddings, record overseas travel and vanity health procedures.

Maybe the financial pressures we’re experiencing are coming from maintaining lifestyle expectations, rather than the increasing costs from the essentials of life.  An AMP/National Centre For Social and Economic Modelling study found the average Aussie family is $224 a week better off than in 1984, and low-income households are $93 a week better off.  Lower mortgage repayment costs are to credit for the exceptionally low cost increases facing households headed by working Australians, and they’ve just fallen again. In the past year the standard variable mortgage rate has slid from 6.85% to 5.95%.

Think about making some small changes to ease the financial pressures, it’s the little, regular savings that can add up to a big amount:

* Forget bottled water. We hate paying $1.50 a litre for petrol but are happy to pay $2.50 for 350ml of water that we can drink for free from the tap. At $2.50 a day, that’s $17.50 a week or $910 a year.

* Two takeaway coffees a day at $3.50 each is $7 a day or $1820 a year.

* Make and take your own lunch to work, saving $6 a day or $1560 a year.

* The average Australian family spends $161 a week on recreation. That’s a lot of money when there are so many free recreational options. Cut that back to $100 a week and as a result save $3172 a year.

Just these four small lifestyle adjustments have saved a total of $7462 a year in after-tax dollars. With the median wage about $55,000, that saving could have a significant impact.

Reviewing your finances regularly is the key to Strengthening Your Financial Future.  Contact us today to help with a FREE finance review.