According to a recent report, the overall price increase of nine per cent for wage earners far exceeds the typical wage increase of just four per cent. This means the cost of living is outpacing income growth, stretching household budgets to their limits. Whether it’s the price of housing, groceries, or utilities, budgeting has become more challenging for everyone.

At Debt Negotiators, we understand the stress this creates. To help you take control, we’ve analysed the average household’s monthly expenses. We can develop practical strategies to manage rising expenses by understanding where your money goes each month.

What are Australian consumers spending money on?

Housing or Rent

Housing is the biggest expense for most Australians, accounting for at least 20% of their income. On average, households spend around $536 per week on rent. With property prices and rental costs continuing to rise, this budget area can be a significant source of stress.

How to save:

• If you’re a renter, ask for a rent reduction, especially if you’ve been a long-term, reliable tenant. 
• If your rent or mortgage is eating up too much of your income, consider downsizing to a smaller home or moving to a more affordable suburb.
• For homeowners, shop around for better mortgage rates. Refinancing could reduce your monthly payments or allow you to pay off your mortgage faster with lower interest.
• Rent out a spare room or consider shared accommodation to cut your housing costs significantly.

Groceries and Food

On average, Australian households spend about 10% of their income on groceries and food, which comes out to around $253 per week. But with food prices rising, sticking to a budget while keeping the pantry stocked can be challenging.

How to save:

• Plan your meals to avoid impulse purchases and reduce food waste. Stick to your shopping list to prevent overspending on unnecessary items.
• Buy non-perishable items in bulk, such as rice, pasta, and canned goods, as it can be more cost-effective.
• Shop seasonal fruits and vegetables, which are often much cheaper and fresher. 
• Reserve takeaway for special occasions or emergencies.

Subscriptions

Subscriptions are one of those expenses that seem small, but they quickly add up. The average Australian household spends around $57 monthly on streaming services and $81 on gym memberships. On top of that, many are unknowingly paying about $105 a month on subscriptions or scheduled payments they’ve either forgotten about or no longer use.

How to save:

• Review your bank or credit card statements and cancel any subscriptions you’re not using.
• Instead of paying for multiple streaming platforms, consider narrowing it down to just one or sharing accounts with friends or family to split the cost. 
• If you haven’t been hitting the gym as often as you’d like, it might be time to cancel or switch to a more affordable option.
• Use subscription management apps to help you monitor and control all your subscriptions, sending you reminders before payments hit or even cancelling unused services for you.

Utilities

Utilities consume four per cent of your budget, averaging $60 per week. Because they’re essential, it’s easy to let utility costs fade into the background. But those kilowatt-hours and litres of water add up.

How to save:

• Understand your usage. Are there any seasonal trends? Are you using more than you expected? Are your appliances and electronics energy guzzlers?
• Reduce consumption. Switch to energy-efficient lights, adjust your thermostat a few degrees lower in winter and higher in summer, and so on.
• Explore other saving opportunities. Check if your government or utility company offers rebates for energy-efficient appliances or upgrades. 
• Track your progress by monitoring your utility bills monthly to see if your efforts are paying off. 

Transportation

Transportation costs consume about eight per cent of an average Australian’s income, which can be a significant burden on the budget.

How to save:

• Evaluate your current transportation habits. How often do you rely on your own car versus public transport, ride-sharing, or cycling? Understanding your typical travel patterns will help you identify opportunities to optimise your spending.
• If you’re a car owner, maintain your vehicle to prevent costly repairs in the long run.  
• Use public transportation when you can and use discount passes for frequent travellers.
• When planning longer trips, book flights and accommodation in advance for better deals.

Health

Healthcare costs are another significant expense for many households, averaging $180 per week. This mainly goes to pharmaceutical goods, insurance premiums, and out-of-pocket costs for medical services.

How to save:

• Maintain a healthy lifestyle. 
• Schedule annual check-ups and stay current on screenings and immunisations.
• Know your insurance coverage, deductibles, and co-pays and choose doctors and hospitals within your insurance network.
• Opt for generic versions of prescription drugs when available.

Takeaway and restaurant meals

We know how enjoyable it is to dine out or explore new places, but with expenses reaching $198 per week, it’s worth taking a look at how those costs fit into your overall budget. 

How to save:

• Embrace your inner chef, planning your meals for the week ahead and avoiding those last-minute takeout temptations. 
• When you do dine out, be a savvy consumer. Many restaurants offer happy hour specials or early bird discounts, so plan your outings accordingly. 
• If your daily coffee fix is putting a strain on your wallet, brew your coffee at home. If you can’t, bring your own reusable cup for a discount and join loyalty programs.

Alcohol and tobacco

While everyone deserves to enjoy themselves, $53 per week on alcohol and $38 on tobacco can undoubtedly make a dent in your budget. 

How to save:

• Track your consumption to understand how much you’re actually spending. Sometimes, simply seeing the numbers can be a powerful motivator.
• Decide on a realistic budget for alcohol and tobacco, and stick to it.
• If quitting altogether seems daunting, aim to gradually reduce your consumption over time.
• Explore new hobbies or activities to replace the time you spend drinking or smoking.

Personal care

Personal care is an important aspect of self-care but can also be a significant monthly expense, averaging around $431. This includes various treatments and services, from haircuts to cosmetic procedures.

How to save:

• Explore doing some treatments at home, like simple facials or manicures.
• Extend the time between salon visits for services like hair colouring or eyelash extensions.
• Identify your most valued treatments and consider reducing or eliminating others.

Consumer electronics

Electronics account for around eight per cent of the average household budget, encompassing everything from smartphones to laptops and gaming consoles. While they keep us connected and entertained, these costs can quickly pile up.

How to save:

• Hold off on upgrades.
• Shop for discounts if you must buy or wait for Black Friday or Cyber Monday sales.
• If you have multiple electronic services (like cable, internet, and streaming), consider bundling them together. 

Budgeting for the Cost of Living Crisis

Budgeting during a cost of living crisis requires a shift in mindset and a proactive approach to financial management. Move beyond simply tracking expenses and adopt a strategy that prioritises essential needs, reduces unnecessary costs, and explores opportunities to enhance financial stability.

Assess your financial situation

Begin by conducting a thorough assessment of your current financial standing. This involves meticulously tracking your spending habits to gain a comprehensive understanding of where your money is flowing. 

Create a flexible budget

Based on your assessment, create a budget that reflects your current needs. Allocate funds for essential expenses first—like housing, groceries, and utilities—before moving on to discretionary spending. Make sure to leave room for adjustments as needed, especially in times of fluctuating prices.

Look for savings opportunities

Identify areas where you can effectively reduce expenditures. Prioritise essential expenses, then critically evaluate non-essential spending and identify areas where you can implement cutbacks without significantly impacting your quality of life.

Boost your income

In addition to budgeting effectively, find ways to boost your income, whether a side gig or leveraging your current skills.

Be financially informed

Stay informed about economic trends and financial news that may impact your budget. Use reputable personal finance resources like books, websites, or podcasts to enhance your financial literacy and empower yourself to make informed decisions.

Manage debt

Debt management is crucial to achieving financial freedom and stability, especially during a cost of living crisis. Start by creating a comprehensive list of all your debts, including the outstanding balances, interest rates, and minimum monthly payments, to understand your overall debt burden and help you prioritise your repayment strategy.   

Once you have a clear picture, create a debt repayment plan like the snowball method.

 

Debt Solutions at Debt Negotiators

If a big chunk of your income goes to debt repayment, there may be an easier way to manage them. Talk to us or try our free debt assessment to start. At Debt Negotiators, we’re real people who get it. We know everyone’s money story is different, so we don’t do one-size-fits-all solutions. Instead, we’ll sit down with you, understand what you’re dealing with, and help map out a plan that works for your life.