Hey, big spenders, don’t burn a hole in your pockets
Time to save, warn financial experts
SOARING interest rates and prices are forcing Australians to axe their expensive spending habits.
Households that could previously afford to splurge – boosted by cash windfalls during the pandemic – have been crunched by inflation increasing at its fastest rate in decades and staples such as milk, bread and fruit prices surging at least 13 per cent last year.
And with a ninth straight Reserve Bank of Australia rate rise likely on February 7, and further increases possible beyond that, the pain is expected to continue for months.
However, bad spending habits can be replaced with good ones in as little as a few weeks, budgeting and finance specialists say.
MyBudget director Tammy Barton said Covid-linked government support and low interest rates before 2022’s spike might have encouraged more spending. She said poor money habits included:
LIVING week-to-week and beyond your means;
NOT having savings in case of emergencies;
IMPULSE spending;
LACK of a budget, and;
SPLURGING on buy now, pay later schemes or credit cards.
“Australians have been on a rollercoaster ride financially since 2020, ranging from job losses to government grants, and now with the rising cost of living and interest rate rises,” Ms Barton said.
“So, it’s not hard to imagine that many thought the honeymoon period would have lasted a little longer.
“The effects of the pandemic on individual financial habits vary – we can’t generalise the behaviour of all Australians.
“Although, as living costs surge, it’s more important than ever for individuals to review their spending
and saving habits, make adjustments as needed and ensure every dollar is accounted for.”
Ms Barton said people could develop good money habits such as budgeting, building an emergency fund containing three months of expenses, automating bill payments and savings, and reducing their highest-interest debt first.
“Building good financial habits can take as little as a few weeks with the right structure and support,” she said.
Financial adviser and author Helen Baker said the more money people had, the more they spent.
“While some people would have used the excess disposable income (during the pandemic) to pay off the home loan, others renovated, invested, or bought a home, and many spent online,” she said.
“Now that interest rates and the cost of living is rising, we have less available cash and it is mentally challenging and habitually challenging for people to adjust.”
Ms Baker said some Australians were spending on “revenge travel” and restaurant meals and had a “live-for-thenow” mentality as Covid-19 cases eased.
She said good money habits included not spending more than you earned, borrowing less than you could afford to pay, and putting money away to cover bills.
“Total your bills for the year and if you are paid monthly, divide by 12, and put that away each month so that when the bill comes in, your money is already set aside.”
Ms Baker said people could change money habits but “you have to want to do it”. “Seeing results will help keep you motivated and you will benefit from them,” she said.