How to reset your household budget to tackle inflation

Whether you’re buying groceries, filling up at the petrol station or reading a utility bill, you’re probably getting a shock when it comes time to pay. Due to rising inflation, we’re seeing price hikes that are sometimes double or even triple what we’ve been used to – which can put huge stress on your finances and household budget.

“I think most people are finding that their money doesn’t go as far as it used to,” says money coach Natasha Janssens from Women With Cents. “Everything’s going up – interest rates, energy bills and food. So it’s definitely a good time to reset your budget and look at ways you can claw back some cash flow.”

Does the B word (budget) scare you?

You’re not alone. Many of us associate the word ‘budget’ with restrictions, says Janssens, but it’s more about spending mindfully and spending with intention.

“Many of us think having a household budget means we can’t have fun or spend the way we want to – it feels a bit like being on a diet!” she explains. “Then we might justify not doing a budget because it’s too time-consuming. But the reality is it’s very simple to set one up and once you do, and get into the flow of it, it becomes a habit.” Still a bit scared? Here are 5 ways to help eliminate money anxiety

Creating a budget for the first time

If you’re new to having a household budget, it’s easy to create one. You’ll need your last three months of bank expenses to get started.

“The most old-school method is to get pen and paper and go through your statements, writing down everything you’re spending,” says Janssens. “You’ll start to see where your money’s going.”

That includes all those coffees, lunches out and expensive supermarket top-ups you may not factor in. And along with bills, don’t forget to jot down all those other expenses, including insurance policies, subscriptions – the list goes on!

There are more hi-tech budget methods too. Some banks have built-in budgeting capabilities in their apps and software. “If you don’t have access to something like that, you can head online to MoneySmart’s budget planner – it’s a very detailed tool. Go through each of the categories and enter in your household expenses for each one to get a big picture of your spending,” explains Janssens.

Once you’ve figured out what you spend per month along with all the necessary expenses (like bills, food, rent or mortgage) and the not-so-necessary ones (eating out, buying things online or subscribing to every streaming service available), you can see where you could possibly cut back and create a household budget that covers your expenses and enables you to plan for the future.

How to reset your household budget 6 ways

If you already have a budget, but it’s stretched to the limit due to rising inflation, it’s time to make some tweaks and, if you can, boost your cash flow, says Janssens.

1.   Shop around. “Look at your energy bills, phone bills and your mortgage – and start looking for better deals,” she suggests. “See what the competitors are offering. The squeaky wheel gets the oil, and most businesses offer their best pricing to attract new customers, so once you have information on better deals, take that to your existing provider. They may match it or you may have to walk away, but there are significant savings to be had doing this process.”

2.   Look for overspending habits. “As you go through the process you’ll see patterns,” says Janssens, “like the fact that you get a coffee from the same place every day, or you buy expensive top-up groceries. You’ll see it’s all quite repetitive – making it easy to cut back because you’re aware of those habits.”

3.   Rein in impulse buying. “Most of us overspend on ‘comfort’ items, such as takeaway, having fun or retail therapy – those are things on which we spend impulsively,” says Janssens. One trick, especially if you have a bad online shopping habit, is to give yourself 24 hours breathing room before buying. Usually, you find you won’t want the item anymore.

4.   Adopt ‘bill smoothing’. “A lot of us have cash flow problems because bills come in at different times and we overspend, then have a shortfall when bills arrive,” explains Janssens. “Instead, figure out what you’re paying on bills each month, set that amount aside in your pay cycle, and automate bill paying. Doing this means you won’t incur late fees and you may even get a discount paying via direct debit. You’ll also know how much is left over for other expenses, discretionary spending and saving.”

5.   Create a weekly spending account. “Even if you’re being paid monthly or fortnightly, divide it up into weekly amounts and put that into an account for daily spending over the week – you can then plan ahead for what you want to do. You might be really frugal with the grocery spend because you’re planning an outing. Once that amount is gone, it’s gone, so you learn to manage it.”

6.   Boost your cash flow. There’s never been a better time to start a side hustle, says Janssens. “We live in a fortunate time with the gig economy, so consider your skills and where you might put them to use to bring in some extra cash.”

Managing your peace of mind

In a time of rising inflation, a household budget might give you some peace of mind and a little more freedom, than just spending without intent. And it’s also important in times like these to face what’s happening and have a plan.

“It’s easy to get overwhelmed by the news; there are lots of negative stories that are outside our control,” says Janssens, “so it’s important to direct your attention away from that and onto things you can do on a practical level to protect yourself and your financial position. Having a household budget and knowing you’re taking steps to prepare for the future and take the pressure off yourself is a great start.”

Having the right insurance policies in place is also an important consideration to help make sure you and your loved ones have cover financially in case the unexpected were to happen. Talk to us about how we can help.

This article is an opinion only, provided for general information purposes and shouldn’t be considered or relied upon as professional or personal advice. If you have legal, tax, or financial questions, you should contact an appropriate professional.