Smart ways of battling higher costs
MANY Australians are feeling the pinch of higher household expenses, but new research shows we're taking sensible steps to stretch our money further.
According to a recent survey by ING DIRECT, eight out of ten Australians say their living costs have climbed over the past 12 months. Among these households, the key culprits are higher utility bills, grocery costs and fuel.
Figures from the Australian Bureau of Statistics (ABS) show that some households are feeling the pinch of rising expenses more than others.
By way of background, the ABS produces a 'Living Cost Index', which shows by how much our after-tax income would need to rise each quarter to keep up with increasing costs.
The latest (June 2013) figures show that government pension recipients and households relying on social security were hardest hit by rising bills. Employees and self-funded retirees were the least affected.
On the plus side, the survey found the majority of households experiencing higher bills are using some smart strategies to make ends meet. Six out of ten (60%) are shopping around for bargains, 53% are spending less and making do with what they have, and 49% are shopping more carefully at the supermarket.
There are other ways to tighten our belts without too much impact on our lifestyle, and it certainly makes sense to shop around for better value on key financial products.
It always amazes me how we tend to seek out discounts on items like groceries or clothing yet we often fail to take the same approach with our everyday bank account, credit card, insurance or home loan. Yet big savings can be made on these products.
Start by taking a look through your transaction account statements. If you're paying a regular account fee of say, $5 a month, switching to a no-fee account could see you save $60 each year. A growing number of accounts have done away with administration fees, and many financial institutions offer zero or low fee accounts to pension recipients. Ask your bank about zero fee account options or check out sites like RateCity or Mozo to see what's available.
Next, check the rate you're paying on your credit card. There's a tremendous range of interest rates charged on different cards - from 9.25% to almost 23%. On a card balance of about $3,000 switching from one of the most expensive cards to one charging about 10% could see you save about $300 in annual interest costs.
If you pay your card off in full each month, the annual card fee becomes a lot more important than the interest rate. Fees can range from several hundred dollars each year to nothing at all, and the likes of HSBC, Virgin Money and BankWest all have zero annual fee options. Bear in mind, if you have an ongoing card balance, a low rate should be your top priority.
The same principle of shopping around also applies to car insurance and home and contents cover. With big variations in premiums between insurers, you could make substantial savings by comparing policies and costs at renewal time.
The internet makes it very easy to compare between insurance companies, and some insurers like GIO and Allianz offer discounts of 10% when you organise certain types of cover online.
Paul Clitheroe is a founding director of financial planning firm ipac, chairman of the Australian Government Financial Literacy Board and chief commentator for Money magazine. Visit www.paulsmoney.com.au for more information.