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The soaring cost of living has been a major crisis in various countries across the world. With the rising cost of living- increase in fuel, food services, mortgages and utilities, interest rates, etc. the general people are in turmoil. People of all groups and demographics now worry about meeting this rising cost of living. As such, this critical issue needs a deeper understanding.
The factors that drive the cost of living to rise around the world include inflation, rising interest rates, and increasing prices of labour, materials, and more. Budgeting, saving, having additional income sources, etc., can be some great strategies to overcome this situation.
Managing or overcoming the cost of living requires the combination of various strategies for it to be effective. But a deeper understanding is essential before you start strategizing to get a grip on these high prices for everyday goods. With the right tools, techniques, and knowledge about the cost of living, you can work towards overcoming it. So, let’s get into it.
Recent Factors Influencing The Cost Of Living To Go High
Many factors contribute to the cost of living became so high. Some major drivers include higher mortgages, inflation, increasing interest rates, everyday goods becoming expensive, etc. The global pandemic and political unrest across countries also contribute to it.
According to the data from the Australian Bureau of Statistics (ABS), the cost of living over the past year for employee households grew by 9.3 per cent. This is the highest annual growth to take place in living expenses since 1987.
Experts believe the unacceptably high inflation is a major cause of this increasing living cost. As a result, the housing, grocery, utilities, and such costs became unreasonably higher. This caused the CPI to rise by 7.3 per cent in the September quarter, an unacceptable high in the last 32 years. Amid the economic turmoil that COVID-19 presented previously, this increase made the economy more vulnerable.
Russia’s Ukraine invasion also led to sanctions, after which crude oil prices increased. With supply chain complications and global petrochemical shortages, Australia sees some of its adverse effects. In summary, all these economic drivers in combination have made the cost of living to get so high for everyone.
5 Ways To Overcome The Rising Cost Of Living
The rising cost of living across various fields can strain individuals and families. However, several strategies can be employed to combat or overcome these challenges. Here are some of the best strategies to consider.
Budgeting and Saving
Creating a budget is one of the most effective ways to manage expenses and reduce costs. By tracking income and expenses, individuals can identify areas where they can reduce spending and save money. At the same time, it is crucial to saving your money for the occasions when it will be necessary. That is, both budgeting and saving are vital factors for you.
You can start saving from a smaller scale to a bigger one. Maintaining a monthly budgeting schedule can play a significant role in achieving that. Budgeting and saving in combination will allow individuals and families to build financial stability over time. This will be a prominent factor in overcoming the soaring cost of living for you and your family.
Refinancing Your Loans
Refinancing loans, such as a mortgage or car loan, can help lower monthly payments and reduce overall interest costs. This can free up funds for other expenses and help individuals better manage their budgets. Debt consolidation can be a great way to get back on track and manage your loans effectively. It will also allow streamlining your finances in one place for better management.
To overcome the cost of living, managing and paying off your loans efficiently is crucial. Paying off debt, such as credit card balances and loans, can help reduce monthly expenses and free up funds for other necessities. As a result, you will be more equipped to have greater financial stability.
Maintain an Emergency Fund
Setting aside a portion of monthly income can help individuals build an emergency fund and save for future goals. It can also act as a savings account for you to set aside for unexpected expenses in the future. Maintaining an emergency fund in the contemporary economic situation is crucial, especially with so much uncertainty up ahead.
By having an emergency fund, you can avoid taking on debt or dipping into other savings to cover these expenses. You can build an emergency fund by saving approximately 3 to 6 months’ worth of living expenses. Make sure to cut back unnecessary costs and avoid taking further loans while building an emergency fund.
Investing Wisely
Investing in stocks, bonds, or real estate can be an intelligent way to grow wealth over time and stay ahead of inflation. However, it’s essential to consider the risks involved and seek advice from a financial advisor before making any investment decisions. Especially when the cost of living keeps increasing, it is crucial to invest safely.
There are many ways you can invest safely. It includes risk management, having extensive knowledge before making the investment, seeking advice and insight from professionals, and so on. As much as it is vital to make investments for a passive source of income, it is crucial to managing these investments wisely.
Have Additional Income Sources
Naturally, with the rising costs of everyday goods and essentials, the limited income source is falling short for everyone. To overcome this scenario, keeping an additional income source for you and your family is essential.
You can keep an additional income source by taking a second job, starting a small business, providing consultancy, working for commissions, etc. Having freelance work can also work remarkably well in this case. So, with additional income sources, you can get extra cash inflows to help you overcome the rising cost of living.
Conclusion
The increasing cost of living- increase in fuel, food services, mortgages, utilities, etc. has presented us with a difficult challenge to mitigate. So, with the right tools and guidelines, we can effectively overcome this crisis and regain financial stability. Get in touch with EFT Capital to get the best loan services and manage your finances better.