Get your finances right when times are tight

You can still save for the future if you’re feeling the pinch—here’s how.

By Ofalyn Ayuk - 3 min read

A little about Ofalyn

As a Member Solutions Consultant at Russell Investments, Ofalyn Ayuk understands all the ins and outs of super and retirement legislation, and loves to answer questions and help members.

As almost everyone has noticed, inflation and interest rates have been on the rise. After 12 interest rate hikes and an inflation rate which spiked to 7.8% in December 2022, many people are feeling the pressure of higher living costs.

Some relief may be on the horizon. As Russell Investments’ Asia Pacific Investment Strategist Alex Cousley notes, inflation has softened recently, and there are signs that we might be nearing the end of the rate hiking cycle. But for many Australians today, money is still tight.

If you’re feeling stretched, staying on top of current expenses is an obvious priority, but forward planning is also important for your future security. It can be a delicate balance, but with a few tweaks you may find that you can do both. Here are some tips on where to start.

• Make savings where you can – If you can cut costs, you can save more. Can you get a better deal on your mobile phone plan, or your mortgage? Could you cancel a streaming service or two? Sit down and go through your regular expenses and you may find areas where you can make savings. You can then set aside at least some of that money for your future.
• Create a budget that incorporates savings and stick to it – There are many ways to make a budget. Find a method that works for you. The government’s Moneysmart website has a simple budget planner, and choice.com.au includes reviews of budgeting apps that can help.
• Start small – Putting aside incremental amounts can make saving more manageable when other expenses are rising. The good news is that every little bit adds up, especially when you’re talking about long-term savings such as your superannuation. Thanks to the power of compound interest, just $20 a month can add up to almost $11,800¹ over 20 years if you’re earning an average of 8% p.a. returns over that timeframe. That’s made up of $4,800 of your additions and almost $7,000 in interest².
• “Pay yourself first” – This old advice works on the principle that you won’t miss what you never had in the first place. If you put your savings aside straight out of your pay—by salary sacrificing into your super, for example—you won’t be tempted to dip into your savings.
• Get a top up – If you’re a low- or middle-income earner, and have some cash to contribute to super, you may be eligible for a top-up from the government, worth up to $500. The co-contribution amount varies depending on how much you contribute and how much you earn, but it is a nice bonus if you’re eligible.
• Get a tax deduction – salary sacrifice and personal deductible contributions to super can save you tax. Contributions to super are taxed at 15% in your fund rather than at your marginal tax rate. The less tax you pay, the more of your hard-earned money you retain—even if it’s set aside for future you to spend.

A few simple changes can help you to safeguard your finances, even when you’re working hard to look after your financial situation now.

Zest! recommends: 

1 Figure quoted is the 'future value' based on the stated assumptions. Discounted back to 'today’s dollars' at 4% p.a. this amount would be $5,385.

2 For illustrative purposes only.

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