Consideration must be given to your cost of living when calculating your potential for financial success. It may be difficult to pinpoint your cost of living and establish if it is excessive. To answer the crucial question, “Is my cost of living too high?” you must first have an understanding of what the cost of living is, how it relates to your income, and how you might utilize the available resources to arrive at an answer.
Revenue and Expenditures
Earning more money means having higher financial flexibility with the assistance of financial adviser Sydney in just about every area of life. Likewise, if your income drops, you won’t be able to afford the basics like housing, transportation, and food.
It’s not only salary, though, but location that determines how much you can spend. If you are concerned about the high cost of living in your area, you may use the living wage calculator for your region to get a better idea.
If you are concerned that the cost of living is too high where you are, research the local living wage and see how it stacks up against your income. The cost of living may become unaffordable if your income is below the local “living wage.”
Evaluate Your Expenses Relatively to Those in Your Local Area
Using a cost of living calculator or getting help from a financial advisor might help you understand what you’re expecting to spend monthly based on your location. As not all calculators are created equal, it is recommended that you utilize many resources to get a feel for how much things typically cost where you live.
Take a break from the calculators to see how the cost of living in your present location stacks up to other similar places in your state or region.
In Melbourne, Sydney, and Brisbane, for instance, a single parent with two children might need a higher living income weekly, compared to other lower regions; it comes in terms of higher child care and housing prices, and other affiliated expenses. If the cost of living in your state is significantly higher than in another, you may want to consider making the move to a place with a lower cost of living.
Does the High Cost of Living Pose a Threat to Your Future Financial Stability?
You might not believe your cost of living is too expensive if you are able to pay all of your present financial responsibilities. However, your future financial stability is rarely taken into account by the standard cost of living calculations. It indicates what you need to earn as a liveable income, but they generally don’t include contributions to an emergency fund, retirement, or other investment accounts.
According to a report from 2020, about half of Australians had less than $200,000 saved for retirement. However, $200,000 won’t go very far in retirement; Australian financial advisors say you should have saved 10 times your yearly wage by age 67. If you don’t include your retirement plan in your cost-of-living calculations, you aren’t gaining a good long-term perspective of your financial condition. Your perception of the cost of living may be incorrect.
In addition, you should consider your financial cushion. The recommended amount for an emergency fund is three to six months of living costs. Nonetheless, it is not what the vast majority of people are putting aside. And that number doesn’t account for the folks who never had any money in the first place.
According to a poll in 2020, about 50% of Australians would have encountered financial problems if their salary was delayed by only one week. This is a symptom that many people are coping with a cost of living that may be too high for their income.
It’s important to factor in long-term requirements as you calculate your current cost of living. A high cost of living might be inferred if saving for emergencies or retirement becomes impossible due to rising costs.
Achieving future financial stability requires careful consideration of the SMSF setup. It involves adhering to legal and regulatory requirements, including obtaining an Australian Business Number (ABN) and a Tax File Number (TFN). Additionally, trustees must formulate an investment strategy aligned with their retirement goals, ensuring diversification and risk management.
The SMSF setup process emphasizes the importance of selecting suitable trustees to ensure future financial stability. Trustees must possess the necessary financial literacy and be aware of their obligations, including keeping accurate records, conducting annual audits, and fulfilling reporting requirements. Their decisions directly impact the fund’s growth and members’ retirement outcomes.
Think About Savings Before You Pack Your Bags
Finding out how much things will cost before making a big move is a good idea. Consider the cost of living in the place you’re considering as much as the wage increase you could receive if you take the job there. After all, you might not feel better off if your earnings increase but your expenses rise at the same rate.
Methods for Reducing Everyday Expenses
According to financial advisor experts at Omura Wealth Advisers, there are alternatives if you find that your current cost of living is too expensive. The cost of living may be significantly reduced by relocating to an area where your earning covers much more. Moving further out of town or even out of state might be an option if you currently reside in an expensive major city.
Of course, not everyone has the means or ability to relocate. A few further strategies for cutting expenses are as follows:
- Create and manage a budget: Write down the money you have coming in and all the items you have to pay for. Is there a way you might free up some funds by paying off large obligations like your vehicle loan or college loan? Perhaps you can reduce unnecessary outlays on things like eating out and internet shopping.
- Insurance and phone expenses, for example, can be adjusted. Get in touch with your service provider or lender and ask if there is any way to reduce your monthly costs. One way to reduce the cost of auto and health insurance premiums is to raise the deductible.
- Keeping a balance from month to month on a credit card will result in interest charges in the double digits, so avoid borrowing money at all costs. You can avoid paying interest if you pay up your monthly bill in full by the due date. Forcing yourself to stay within your means involves never taking out a loan, which includes never using a credit card to make a purchase or never getting a vehicle loan.