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6 things you can do to beat inflation

Inflation has certainly pushed prices up this year, particularly on the big three: housing, fuel and food. The good news is, inflation will eventually normalise as a matter of course. The bad news is, we’ve all got to live through it until it does. 

With everyday necessities requiring more of our dollars, it pays to cast a critical eye over your spending, investing and income to ensure you stay ahead. Here are six things that can help you do exactly that.

1. Consider your investments

To hedge against the sharemarket dip, it’s important to harness the power of diversification. That means spreading your portfolio across a range of assets, including property, global and Australian shares, bonds, cash and commodities.

'Safer' assets include raw materials like oil and metals (especially gold), which generally increase along with inflation. High-quality bonds with a short duration are also considered lower-risk in a high-interest environment.

2. Pay down your debts

For now, interest rates on debt are only going up, but the same hasn’t been true for interest rates on savings. So you should make paying off your debts your highest priority.

Always keep at least three months of living expenses readily accessible in your ‘emergency fund’, but otherwise use savings to get rid of your debts. Once they’re gone, the money you were using to repay your loan can go towards building your savings back up. 

3. Reduce your spending on non-essentials

This one is trickier than it seems, mainly because deciding between a ‘want’ and a ‘need’ can be problematic. Some things are obvious, like food and shelter. Other things are a little more ‘grey area’. 

For instance, insurance will be an essential for some, a ‘nice to have’ for others. Same for salon hair colour (speaking of grey areas!), a weekly round of golf or a couple of beers at the club on a Friday night. After all, feeling good about yourself, getting exercise and being social are all essentials for a long and happy life!

So, only you can decide what’s in your ‘non-essential’ pile… but do try to be ruthless. 

4. Shop wisely for things you do need

Once you’ve got your list of essentials, it’s time to go shopping. Here are a few ways you can save money on everything you need.

Shop around – compare prices at a few different locations.

Stop impulse spending – remember your ‘essentials’ should be exactly that.

Eat out less – cooking at home is usually far cheaper than eating out.

Buy second hand – clothes, furniture and toys can all be found for much less.

Switch off - Cut your utility bills by installing energy efficient bulbs, taking shorter showers, unplugging the second fridge, hanging clothes in the sun to dry, and turning the heating down and the cooling up.

5. Compare and negotiate your services

Phone all of your suppliers to negotiate a better deal. That includes your bank, insurance, internet and mobile phone providers.

As a starting point, use a comparison website to see what competitors are offering new customers. Try Canstar, Finder or iSelect.

If your current provider won’t match the better offer, be prepared to move your business to save money.

6. Find a new source of income

You could start a side hustle to earn extra cash to meet rising costs. There are plenty online options, so you don’t even need to leave the house. Some ideas to get you started:

Of course, if you’re collecting a pension, make sure you check with your financial adviser to ensure the extra income you earn will be worth your while.