How to deal with rising inflation

Key takeaways

  • Investing a portion of your income is one way you can keep up with, or even outpace, inflation

  • Shopping around for the best deals on your home loan, electricity and insurance, can end up saving you hundreds of dollars over the long-term

  • You can find an extra source of income outside of your 9-to-5 job by earning passive income or renting out your garage space, for example.

Between March 2021-22, inflation in Australia rose by 5.1%. Meanwhile, wages only rose by 2.4%1.

With the bare essentials becoming – well, expensive, it’s not surprising that many people are looking for new ways to save money or increase their income.

The good news is there are steps you can take—and actions to avoid—that can help you navigate this period of high inflation, for however long it lasts.

In this article we look at some of the ways you can offset inflation by continuing to invest, increasing your income or reducing expenses.

Three ways to manage rising inflation

Here are some of the best ways to manage rising inflation:

1. Continue investing

Investing a portion of your income is one way you can keep up with, or even outpace, inflation.

While rising interest rates or falling sharemarkets may cause many people to second guess themselves when making investment decisions, it’s important to stay focused on your long-term goals and avoid being influenced by short-term market volatility.

Having a diversified investment plan—money invested across many asset classes and in many industries—will help to cushion you from major sharemarket falls. 

2. Find ways to reduce your expenses

Everyday bills

Shopping around for the best deals on your home loan, electricity and insurance, can end up saving you hundreds of dollars over the long-term.

You may also want to consider cutting down on subscriptions or memberships you don’t use, and make sure you’re getting all the concessions you’re entitled to such as rebates and pensioner discounts.

Home loans

Official interest rates are predicted to continue rising throughout the year, so if you have a home loan that isn’t on a fixed interest rate, you’ll need to factor in increased repayments to your budget.

Electricity

Consider using some of these energy saving tips:

  • Check out government and council rebates to reduce your energy bill

  • Switch to energy efficient lightbulbs

  • Consider installing solar panels: while costly initially, this can save thousands of dollars over the long-term

  • Water savings: install a water efficient showerhead and only run the dishwasher on a full load

  • Only heat and cool the rooms you’re using and use a timer

  • Unplug unused electronics

  • Hang-dry your laundry rather than using a dryer

Groceries

While food might be a necessary expense, there are ways to save without compromising quality.

Meal planning is a simple way to get better at grocery shopping to reduce wasting food. You could also consider finding recipes that use the same ingredients as you’re more likely to use up an entire bag of vegetables or a fresh bunch of coriander.

You may also want to consider growing your own vegetables.

Petrol

While we can’t control global oil prices, you can plan clever ways to reduce costs.

  • Request to work from home a few days a week

  • Ride your bike to work and get the benefit of a good workout

  • Use public transport – if you live in a city or town with a decent public transportation system, this alternative is a great option to cut down on commuting costs

  • Carpool – if you have colleagues who live in the same area, you could split the driving between you. 

3. Increase your income

Although there isn’t always a quick or easy way to increase your income, there are options for earning extra cash to cover more immediate expenses.

Passive income is a great way to earn money with little effort.

You can also find an extra source of income outside of your 9-to-5 job by:

  • renting out a room or parking space

  • pet sitting

  • dog walking

  • online tutoring

  • or driving for a rideshare service.

Lastly, while it may not be easy to increase your pay overnight, you could consider ways to use your job performance and rising inflation to get a promotion or salary increase. Or find a better paying job.

Seek help from a professional

If you value the experience of experts in other aspects of your life, don’t discount it when it comes to managing your life savings.

Financial advisers can help you with all aspects of your financial life—savings, insurance, debt—while keeping you on track to achieve your goals.

More importantly, they can answer questions like:

  • What age can I stop working and retire?

  • What strategies can I use to build my wealth?

  • How can I ensure my wealth is transferred to my children?

Source: MLC August 2022

1 Australian Bureau of Statistics – March 2022: https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/wage-price-index-australia/latest-release

Important information and disclaimer
This article has been prepared by NULIS Nominees (Australia) Limited ABN 80 008 515 633 AFSL 236465 (NULIS) as trustee of the MLC Super Fund ABN 70 732 426 024. NULIS is part of the group of companies comprising Insignia Financial Ltd ABN 49 100 103 722 and its related bodies corporate (‘Insignia Financial Group’). The information in this article is current as at July 2022 and may be subject to change. This information may constitute general advice. The information in this article is general in nature and does not take into account your personal objectives, financial situation or needs. You should consider obtaining independent advice before making any financial decisions based on this information. You should not rely on this article to determine your personal tax obligations. Please consult a registered tax agent for this purpose. Opinions constitute our judgement at the time of issue. The case study examples (if any) provided in this article have been included for illustrative purposes only and should not be relied upon for decision making. Subject to terms implied by law and which cannot be excluded, neither NULIS nor any member of the Insignia Financial Group accept responsibility for any loss or liability incurred by you in respect of any error, omission or misrepresentation in the information in this communication.