Shop around to get ahead in these tight times

IF your pay packet doesn’t seem to stretch as far these days, you’re probably not imagining things.

Wages are growing by a record low of just 1.9 per cent annually, and with inflation also running at 1.9 per cent the purchasing power of your pay cheque may not have increased at all. At times like these, it’s important to make your money stretch further.

Right now, household incomes are flatlining and making every dollar work hard is essential. It can even see you forge ahead financially despite wage and salary growth being stuck in neutral.

In the current environment, reviewing your household budget is a must-do. Yes, I know my mantra is “budget, budget, budget”, but it’s a great way to ensure you are living within your means rather than relying on debt to maintain your lifestyle.

It’s also important to shop around for major expenses. When your car or home and contents cover falls due for instance, don’t just pay the premium. Take a look and see if you could do better elsewhere.

A colleague of mine recently knocked $200 off her annual car insurance premium just by switching to a more affordable insurer.

Power bills are one area where many of us are feeling the financial heat. According to Finder, 1.4 million households often struggle to pay their energy bills.

Switching energy providers can provide savings. I realise that the sheer volume of comparison sites don’t always make it easy to know which provider offers the best deal.

However, by looking back over previous power bills you should be able to form a reasonable picture of your usage patterns. Use this to narrow down the plan best suited to your needs and budget.

Don’t overlook financial products. Fortunately, low wages growth is coinciding with historically low home loan interest rates.

But credit card rates can still exceed 20 per cent, and on the average card debt of $3100 you could be paying interest of more than $600 a year. Yet this cost can potentially be halved by switching to a lower rate card.

A balance transfer deal can help to knock off card debt if you knuckle down to pay off the balance during the zero or low interest period.

The catch is that high rates can apply to new purchases, so the success of a balance transfer can hinge on sticking with your budget rather than relying on cards to pay for everyday expenses.

In today’s environment it can pay to be careful about taking on more debt. A rise in interest rates could financially skewer you. Paying cash where possible has far less impact on our financial wellbeing, especially when it’s part of a sensible budget. 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.