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Interest rates, inflation: an expert reveals four ways you can save money quickly

Inflation is peaking, interest rates are on the rise and many families are struggling to keep up with their rising bills.

Finding ways to reduce financial stress can be overwhelming.

For many people, the numbers themselves are hard to understand – but they know that means they have to tighten their belts.

The Reserve Bank of Australia this week raised its cash rate target by 50 basis points to 1.85 per cent.

The annual CPI inflation rate also rose to 6.1 percent in the June quarter, due to higher housing construction costs and car fuel prices.

So what can you do to relieve your financial stress?

Elson Goh, a teacher and business planner at Curtin School of Business, told NCA NewsWire that there are four main ways people can save money.

Revise your loans

Goh said that everyone with a loan should first contact their current lender to try to get a better deal.

“It is often more expensive to acquire a new customer than to retain an existing customer,” he said.

“Go to a bank branch and introduce yourself to a lending manager. It can be easier than dealing with a call center representative.”

Guh also recommends people use a mortgage broker.

“A good broker will negotiate a better deal with the existing lender and present other suitable opportunities,” he said.

Your current lender may respond better if your case is well presented.

For example, it is pointless to ask your lender to match the rate your co-worker was talking about when his loan size is $800,000 while yours is only $350,000.

“You need the right information like the appraised value of your property and whether or not you have 20, 30 or 40 percent of the equity in your home.”

Comparison sites can be a useful tool, but Mr. Goh warns that they are not perfect.

“You have to be careful as some products may be heavily promoted on these sites and not every lender is represented,” he said.

“Plus, you can’t just focus on the interest rate or comparison rate, as there are other things like fees, loan features, loan term and product flexibility to consider.

“If you are refinancing your home loan, consider the remaining term of your loan.

“If you have the property and the loan for say five years, and you get a new one for more than 30 years again, you may be pleased that the monthly payments are much lower and it seems affordable.

“But if you only pay the minimum repayments, you may end up paying more interest over the entire term, and it will take longer to become mortgage-free.”

Switch your interpretation

The main types of super funds are business owner, retail, industry, and self-managing.

Before making a transfer, Mr. Goh said, you should seek advice if you have a defined benefit scheme, a constitutionally protected fund, or employer-paid benefits.

“You will not be able to get your dues back once you switch to another fund,” he said.

This can also apply to any applicable insurance policy in your current fund.

The tax office website is a good place to start your search.

“However, it is pointless to pursue returns because past performance is not a good indicator of future results,” Goh said.

“What you should consider is making sure that you are paying for the services and features you need and checking if the fund is investing at the level of risk that suits you.”

Insurance and utilities

Includes personal, home and content, motor, and health insurance, among others

Mr. Goh recommends that people seek advice when dealing with personal insurance.

“Your health condition was accepted by the insurance company at the time of application,” he said.

“You are covered under the terms of the agreement as long as you pay your premiums, regardless of changes to your health.

“Any changes to personal insurance may result in a reassessment of your current health status, which could result in a chargeback of premiums, exclusion of benefits, or outright denial of coverage.”

General insurance varies and a cheaper policy is often the result of lower coverage or a stricter definition of payment.

But Mr Goh said there are things to consider to make sure you are paying for what you need.

“For example, your home insurance coverage should only be the amount needed to rebuild your home, not the full purchase price,” he said.

“The excess amount you pay when you file a claim is a form of self-insurance.

“Your premiums will get cheaper as your policy increases. You can increase the surplus if you have money saved and you have a low claims history.”

Food, take out and subscriptions

When it comes to everyday costs like food and going out, Mr. Goh recommends that people get the whole family involved.

“Instead of trying to craft a battle plan on your own,” he said, “you might be surprised by the variety of suggestions that might emerge from people with different points of view.”

Mr Goh said people should make small changes over long periods of time, rather than strict abstinence.

“It is easier to make small, manageable changes than big changes that increase your stress levels. The latter often leads to increased spending through retail therapy.

“Be creative and be flexible with your meals. Replace ingredients that have gone up in price with more affordable alternatives when cooking.

Or try preserving vegetables and making jam from seasonal or abundant produce.

“These are some of the things our ancestors did after the war and were able to thrive despite being subjected to similar if not worse inflationary conditions.”

Mr. Goh also recommends that people consider their monthly subscriptions.

They are often overlooked payments. If you are not using the Service or the entire subscription, cancel it.

It also suggests people find ways to reuse and recycle where possible.

“You can breathe new life into old furniture with a fresh coat of paint or a box of screws,” he said.

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