Financial wellbeing tips to ease the pressure of rising interest rates and the cost of living

Jun 24, 2022

At Tribel, our goal is to help manage your financial wellbeing, whatever life throws at you. Very few Australians will be immune from the rising costs of living coupled with rising interest rates. For many, it will be the first time they will be faced with these kinds of financial pressures, as interest rates have been at record lows for at least a decade.

It is clear that many households are already starting to feel the pinch, in fact new Mozo research has found that 64% of Australians are stressed and anxious about their financial future.

Planning helps you to keep a step ahead. Here are a few ideas from our team to help you get organised for the more expensive times ahead.

  1. Get a clear picture of your financial position
  2. Review your spending habits and create a new budget
  3. Conduct a stocktake of your debt
  4. Review your investment strategy
  5. Ensure you are adequately covered should the unexpected occur
  6. Continue to plan for the future – get some professional advice if needed

Getting a clear picture of your financial position

This first step is more important than ever in these challenging times ahead. Effective management of income and cashflow has become increasingly complex with many Australians now having multiple income sources, whether it be freelance work, side hustles or investments. Keeping track of spending has become much more difficult, with online spending, cashless transactions, subscriptions and Buy Now Pay Later schemes becoming more and more prevalent. Nevertheless, effective cashflow management is the cornerstone to achieving financial wellness, so it’s vital to get a hold on your ins and outs and ensure you live within your means.

The first step in taking control of your finances is to work out how much income you receive from all sources and where the money is spent. Tribel Advisory offer a cashflow management plan that would assist with this.

Review your spending habits and create a new budget

If you are one of the organised ones who already has a household budget in place, that is a good first step.  However, with the rising prices of oil, petrol, groceries and other day-to-day items all hurting the hip pocket much more now than ever before, then now is the time to review your budget or to create a new one.

According to figures released by the Australian Bureau of Statistics (ABS), the Consumer Price Index (CPI), which measures household inflation, rose by 2.1 per cent in the first quarter of 2022 and 5.1 per cent annually. These quarterly and annual increases are the largest since the introduction of the GST more than 20 years ago.

During the pandemic, a lot of us switched to online shopping or signed up for a few extra subscriptions such as Netflix, Apple TV or Disney Channel.  Meal subscriptions such as Marley Spoon and Hello Fresh might have been too tempting, or perhaps you treated yourself to gourmet subscriptions such as Cheese Therapy or Wine Selectors (ok, we get the picture)!  It’s easy for these subscriptions to become a set and forget scenario, and while we felt that they were necessities during lockdown, now that we are out and about a little more, it’s worth reviewing whether we really need all of these.

It is also a good time to shop around with your household bills. Review your energy supplier, phone plans, insurance and healthcare plans and make sure you are only covered for what you need and are getting the best deal for each of these.

If you are in the market for new appliances, now is a great time to review the energy efficiency of your appliances and perhaps purchase new, more energy efficient models. Take advantage of EOFY sales but don’t be tempted to purchase the cheapest if it is not energy efficient, as you will find you end up paying for this in the long run.

There are many ways to keep track of your cashflow, free budgeting tools can be downloaded, but everyone has very unique and individual circumstances, so we suggest reaching out to your Tribel Advisor to assist.

Conduct a stocktake of your debt

At Tribel, we believe that debt is an opportunity to achieve a desired lifestyle quicker, whilst also reaching investment goals sooner. However, it is important to recognise the difference between bad debt and good debt. It is also important to ensure your debt is manageable and allows a little wriggle room, so as not to cause stress.

Debt is often perceived as a negative. If not managed correctly, all debt can quickly become the negative burden it is so often envisaged. Yet debt can also be a mechanism to build wealth.

The first step in debt management is to try to eliminate or significantly reduce your bad debt. Bad debt includes non-income generating debts, such as credit cards, BNPL and personal loans. Some debt such as your mortgage, investments or even student loans can be perceived as good debt as they have the ability to grow wealth or generate additional income.

Your mortgage is usually viewed as good debt, given the value of property usually increases, however if you have no intention of selling your home or renting it out, it is still advisable to pay it off as quickly as you can. With this in mind, it is worth re-evaluating your current mortgage and potentially refinancing. With interest rates on the rise, debt management options such as fixed interest rates, offset accounts, making extra repayments when you can, and changing the frequency of your repayments can all help accelerate paying down this debt.

Our financial planners work with our clients in a one-on-one capacity to objectively evaluate individual debt profiles, reviewing potential risk scenarios and recommending strategies and tactics that can help minimise effort, stress and the overall servicing of your debts.

We work closely with our clients across two plans that can help drive financial wellness through debt: the Debt Reduction Plan and the Wealth Accelerator Plan.

Review your investment strategy

In challenging economic times, being strategic about your investments can reap rewards in the long run. Investing should never be viewed as short term, nor should you be reactive or panic when making investment decisions.

As those who have lived through high inflationary times can attest (not seen since the 70’s and 80’s), investment portfolios can be adversely impacted. Some asset classes fare better than others, so tweaking your investment strategy to steer away from interest rate sensitive stocks and moving towards a more diversified investment portfolio is recommended. Commodities such as gold has also proven strong when inflation is higher than interest rates.

It is important to reiterate that keeping a level head about investing is paramount and while you may feel compelled to let emotion take over, it is important not to panic and to act strategically.

At Tribel, our wealth management plans map out your expectations and risk appetite, to help you select the right investment vehicle, asset class mix and underlying investments.

Ensure you are adequately covered should the unexpected occur

Unexpected events can happen to any of us, so ensuring you are covered for this within your overall financial and wealth building plan is extremely important. Without contingencies proactively put in place, events such as a critical illness, death, injury or disability will have

a significant impact on your finances especially in challenging financial times.

Personal risk management is often the part of financial planning that is neglected by individuals, but this protection is one of the most important parts of building financial wellness.

To read more about personal risk management, we recently interviewed two of our clients on how this changed their lives. In the first case study, we introduced Tribel Advisor, Simon Little’s client, Laura who thankfully took up the right mix of cover at the right time. In the second case study, we introduced Tribel Advisor, Dan William’s clients Tom and Nicole whose planning review left them with more cover and less premiums.

These two case studies offer prime examples of why personal risk management is important and can help improve your financial wellness, especially in cases when something unplanned occurs.

Continue to plan for the future – get some professional advice if needed

Lastly, but certainly not least, is planning for a secure future. While it is tempting to live for the now, effective financial advice for retirement readiness is something clients often thank us for later.

When economic conditions change, it is important to review your superannuation portfolio. Whether you have a self-managed super fund or a traditional fund, the portfolio of investments that sit inside your fund may be significantly affected.

At Tribel, we offer interconnected plans that manage saving for retirement, the transition out of full-time work and the passive income flows during retirement. Our planners can work with you to map out the optimal transition path from work, into life beyond work.

It is important not to set and forget your plans for the future, whether it be your wealth management, superannuation, or your estate planning.  Having an advisor to review and recommend changes along the way can save you a fortune and ensure no surprises pop up at a time when you need security the most.

All of the material published on this web site is for information purposes only and does not constitute advice. This information is of a general nature only and has been provided without taking account of your objectives, financial situation or needs. Because of this, we recommend you consider, with or without the assistance of a Financial Adviser, whether the information is appropriate in light of your particular needs and circumstances

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