There’s no escaping the fact that retail prices, utility bills and interest rates remain persistently high. If you’ve managed so far, but feel as if you’re stretched to the limit (or would just like to hold cost increases at bay so that you can add to your savings) here are some strategies to adopt.
Lock down your major fixed costs first
- Housing
Mortgage payments or rent are the biggest expenses for most Australian households.
Homeowners should review their mortgage rates annually, not just when interest rates change, to make sure they are getting the best deal. Switching to a new mortgage provider with a better rate, even if the reduction is only one or two basis points (e.g. from 6.00% p.a. to 5.99% or 5.98%) can save thousands of dollars over the life of the loan.
Renters still have options, despite the tough market conditions. You may be able to negotiate a longer lease in return for smaller rent increases. Landlords value long-term tenants, and recent legislative changes in most states mean that rents can only be increased every 12 months.
- Utilities
Electricity and gas prices tend to reset every 12 months, so compare plans when this happens to make sure you are on the lowest rates. You can do this online at Victorian Energy Compare or Energy Made Easy for the rest of Australia.
Adopt a strategic approach to groceries
Grocery prices can seem to rise faster than the CPI suggests. Attack this problem by:
- Buying in bulk when possible, e.g. when ‘specials’ are offered
- Maximising your use of seasonal produce, which is often cheaper
- Trying generic supermarket brands, where quality can be just as good
- Joining a supermarket loyalty scheme to earn cashback, but staying open to buying competitors’ specials
Inflation-protect your insurance
Review your home and contents insurance to make sure your cover is adequate given recent price increases and property valuation surges. Being under-insured can be a costly mistake. But rein in likely premium increases by increasing your excess and dropping any expensive extra benefits (such as motor burnout or portable items cover) you’re unlikely to need or can accept the risk for.
Apply the same scrutiny to any extras cover on your health insurance. Is the cost of cover for items like dental, optical, physio and podiatry greater than your likely benefits if you’re young and healthy? Conversely, if you’re past childbearing age, make sure your premium omits obstetrics.
Take an aggressive but selective approach to debt
Make the elimination of any credit card and BNPL debt you carry from month-to-month your first priority. Their extortionate interest rates will make mincemeat of your budget.
On the home loan front, aim to build a modest repayment buffer in your offset account. And try to avoid committing so much of your income to fixed loan repayments that you have little or no cash buffer left. This may mean borrowing less than the available maximum and choosing a longer loan term, for the sake of increasing your ability to withstand interest rate shocks and inflation.
Build a buffer into your budget
A budget that’s too rigid will collapse under inflation. Your spending categories (e.g. groceries, utilities, fuel) will need to be in ranges, not fixed numbers. A 3-6 month emergency cash buffer will allow you to absorb price increases without destroying your budget.
Adjust your savings strategy
Your emergency savings belong in a high-interest savings account. Shop around for the best rates rather than leaving them in a low-interest account with your main banker. Review your interest rates regularly, because banks profit from your inaction.
Focus on income as well as outgoings
There’s a limit to how much you can cut expenses, so try to negotiate your salary actively, especially if it hasn’t kept pace with the CPI. When you do get a pay rise, immediately siphon it into your emergency savings to avoid lifestyle creep.
Also consider creating a secondary income from a side hustle.
Take a tactical approach
Inflation-proofing your budget in 2026 isn’t about extreme self-denial. It’s about choosing flexibility, regular reviews and deliberate trade-offs.
You can consult your financial adviser for help setting your household budget, and to tap into their inflation-proofing expertise.