Episode 2 | Cost of Living | Enriched Wealth

11 Sep

We’re excited to continue our journey with you by tackling a topic that’s on everyone’s mind: the cost of living.

In this episode, we dive deep into understanding the cost of living and how it impacts your financial wellbeing. We break down what cost of living really means, how inflation plays a role, and most importantly, how you can manage and mitigate these rising costs. From practical strategies to innovative thinking, we’ll help you navigate this financial challenge with confidence.

Join us as we discuss:

The concept of cost of living and its components
How inflation affects everyday expenses
Strategies to manage and reduce your living costs
Ways to increase your income and build financial resilience
Tips for aligning your expenses with your personal values and goals

Whether you’re feeling the pinch of rising prices or looking for ways to optimise your finances, this episode is packed with valuable insights and actionable advice. Grab a notepad, and let’s turn these financial challenges into opportunities for growth and stability.

Tune in now and continue your journey to enriched wealth!

Transcript

Kris Tatt

Alright, welcome back to another episode of the Enriched Wealth Podcast with myself, Kris Tatt and today we are going to talk about a topic that's been a bit of a hot button topic for the last little while with everyone and that is cost of living. And I know it's been in the news and it's talked about and everyone feels it in different ways. So today we want to talk a little bit about the cost of living, understanding the numbers, some strategies around how you can combat cost of living. But also to hopefully coming at it from a bit of a different perspective than we have in the past.

Thinking through well what does it, what does it actually mean for each of us individually because it is different for everyone and it will impact everyone in different ways. So we really want to make sure that everyone's got the tools they need to approach it in the right way and not just think about it. As all know it's the prices going up what do I do and and giving you back some control and feeling like you're not losing control and and a lot of times with these kind of situations it can feel like you you've got no agency and it's out of your control where you do have some control. And so we want to talk

some of those things today, some of those strategies and hopefully some of those reminders as well too. And just maybe different ways to approach things and and think about things that may not be the norm or the things that you've thought about before in the past, but hopefully and it doesn't mean you have to follow them. I'm not telling anyone this is the way you have to do it, but hopefully just giving you a bit of a different perspective and a refreshing perspective on it. So the first thing is we want to talk about how we got here. So we talk about cost of living. We talk about prices going up and a lot of it comes back to inflation and inflation sounds like this big dirty word

and it's used as a bit of a either a political tool or an election thing to say we're gonna deal with inflation or we're dealing or inflation's rising or different things like that. Inflation is a part of life. If you look back over the last 100 years of of us using money and really being able to track it over time, inflation is what means that the bottle of milk that costs $0.10 however long ago, now costs I think it's $3 and things like that. So it's it's about the fact that prices go up but also to our income

guys up. But what we wanna be thinking about is it cost of cost of living crisis as they're calling it is when all those things go up at the same time, which can be really daunting and and quite a contrast to maybe where we were during the pandemic where interest rates were low and things were different. And So what we've got to remember is everything goes through a cycle. So if we go back to the 1970s, we had really high inflation. Back in the 1970s. We also had really high interest rates. And the idea behind those high interest rates is that people who have a mortgage will have to put more into that mortgage and

go into their credit card or into their car loan and they'll have less to spend on other things. And what that does is it slows down the economy. So people then aren't buying as much discretionary things or seeing it as I've got spare cash, I can spend more on this so I can buy this for more and things like that. So when it's an inflationary retirement, we're seeing is that prices go up and as prices go up, they impact other things. So if petrol goes up well and it costs more to deliver groceries to the grocery store, so then groceries go up and things like that. So there's a bit of a spiral that can go on and that's what we've seen

coming out of the pandemic. And I think part of it is we saw there was a really compressed period where prices didn't change and a lot of that was an understanding that we were all locked at home. People are doing it tough. But as we came out of that, as we had things like we couldn't get cars delivered, so used car prices went up. Everyone knows, everyone knows the scenarios there. So what that does is it puts pressure on inflation and and what are those interest rates to try and bring down that inflation, but it does create a cost of living issue. And So what we've got to remember is everything goes through

pause and nothing is forever. So just like we haven't, we don't have low interest rates forever. We don't have a high interest rates forever either and we don't have high inflation forever. It just feels like it at times when you're in the midst of it and and you can get stuck with it. So today we're going to talk a little bit about

talk to little bit about how we've got here. But now we want to talk a little bit about well what what can we do around our cost of living. And and what I wanted to start with was actually really thinking through living and what does it mean to live. And you might be thinking well you know we've got these cost pressures and things like that. And and I everyone's feeling that don't worry I assure you I'm in that same boat. But also to all want us to think about maybe think a little bit differently about how we can approach some of those costs or how we can really think about how we want to live. And I think a lot of times we get

started along with what society expects of us or we get carried along with doing things a certain way and we don't really actually think about well, what do I want, what do I actually want out of life. And is the choices I'm making actually taking me closer to what I want. And so I'm going to use a couple of examples through here. I've actually got a little quote I'm going to read first from Simon Cynic in start with why. And he says for values or guiding principles to be truly effective, they have to be verbs. It's not integrity. It's always do the right thing. It's not innovation. It's look at the problem

from a different angle. Articulating our values as verbs gives us a clear idea that we have a clear idea of how to act in any situation. And I think one of the big things for people is to actually to find their define their value. So I actually really think about what is it that I value, What is it that I care about And that could be a lot of different things. But putting it in context of a doing word, so if I value my health, what does it actually mean as a verb? Does it mean that I eat healthy? Does it mean that I exercise twice a week? Write down those actual things that you want to do

at those verbs, those doing words that define your values and the things that you really want out of life. And I think sometimes we don't actually take time to sit and think about that. Life is so busy and I'll get it. We've got young kids and and the time we actually get to yourself is is quite small. You're always thinking about what other people want or making sure you're dealing with other peoples needs and wants in life. And sometimes we don't actually stop to think about our own. But I think it's really important to actually sit and take stock on a regular basis. And when I say regular, it's not every week, it maybe maybe once a year, twice a year

you actually sit down and say what do we want out of life and are the things we're doing taking us closer to that. So an example of of thinking a little bit differently about life is I was talking to a couple of the other day and they they were thinking about do they need two cars, they've got two cars, do they actually need two cars? And so we talked a little bit about the idea that you know, as as as a Western society, we we've got to this normal of everyone owns their own car, but we don't always think about the cost of owning,

running a car. And we just think that's part of life. And so we talked about, well, what would it look like if you had one car And they said, well, you know, we can still get to work because actually work out quite close to each other. So it wasn't going to impact that normal travel routine. Each day, if they were in different directions, it might be a different conversation. But they were near each other in terms of where they work. And then too, we were talking about, well, what what would you use that second car for outside of those normal times? And and for them, to be honest, it was we might use it once a week that we're in different places. And so I said to them,

well let's, let's, let's look at the costs, let's you know to have that second car, you've got the insurance, you've got the rego, you've got servicing, you've got putting petrol in it to actually drive to where you need to be. You've got the other consumables like tyres and things like that, that all add up to the ownership of that car. And I said to them, if you spent $1000 on on Uber over the next 12 months instead of having a second car, would you feel like that was a lot of money? Oh yeah, probably felt like we've wasted it and it's like, but you're happy to spend 2 or $3000 to have that second car sit in the driveway

and at the end of the day, it's not actually giving you any different scenario. You're still getting from A to B. And so sometimes we don't always think about the overall costs and I'm going to get into it when we talk about expenses. But it's really understanding the numbers and the impacts of what we do to to our daily lives. And sometimes we get we just keep hurtling down the road and not really actually thinking why we're doing some of the decisions we're doing or or thinking that it's a necessity and sometimes it's actually not. We've got such a great life

in Australia. We've got so many different options it's sometimes

we don't always stop to think about what those options could look like and even just trialling them for a while. Hey look that that couple might go back to one car and for two or three years it works. And then they do need a second car. But they could have saved money over that time as well too by not having that second car and actually thinking differently. And they might actually force them to be in the same car every once in a while and talk a bit more as well too. So there's all these other things that we don't always think about are when we think that's what we have to do. So that's that's the first thing I want to think about is those values. So if I want you to take a pen and paper and write down what are the things you really want out of life

and are you moving closer to them or further away from them. And I think a lot of times we don't really think about what we what we want, how we want it what we actually really want from life is that really what we need? Is that really what we want. And so another scenario is an upgrade to a house, upgrading your house. And I, you know everyone has to change houses at different times. I get that and if if you love having your house, that's great. But some people just feel that because they've hurt more. Oh I can, I can go and get upgrade the house. I can get a bigger house,

can get some extra rooms, you know, go to a new house and get extra rooms. But they don't. They don't always think about, well, what's the impact on now I've got extra spaces to clean. I've got higher rates. I've got higher insurance. The mortgage repayments have increased but and now I'm I'm working longer but I'm not actually enjoying that thing that I set out to get because it's actually caused more angst, more stress rather than actually being more fulfilling and actually giving me what I thought I wanted and and and so it's going to be different for everyone. But you've really got to think about that

first what what do you want? And I know sometimes

that can be hard or sometimes it's hard to get that clarity, especially when you do have competing interests, if you've got kids, if you've got a spouse who might look at things differently, they they all need to be taken into account. But you've really gotta sit down and be be clear on those things that you want. And I'll talk about how that then impacts your expenses as well. So just one more scenario, I'm thinking a little bit differently. I've got a friend who has had a smartphone for years. And in seven months ago, I think it was, he got rid of his smartphone and he went and got a,

I'll call it a dumb phone. It can send text messages, it can make calls, and that's about all it can do. And the reason he did that was he realised that he wanted more time in his life. And one of the big things that was taking time away from his life was using his smartphone. He'd get caught on social media or he would watch, watch videos or whatever it was. I'm sure most of you have a smartphone and you've probably spent more time than you have doing things that that you may not may not actually really enjoy. And so he, he said to himself, what are the things that I really love, actually want to read more? And what's stopping me from reading? It's actually

owning a smartphone. And so he's he's sort of removed himself now from having a smartphone and he's like reads I think a book a week or a fortnight and he's getting other things done that he's really wanted to do. He's tried his hand at drawing as well too. But there there was all these things that he wanted to try and experience. But he could see that because of his decisions he wasn't able to do that. And consequently enough he's actually a bit of financial position because he's not spending as much money on a phone age each month either. And he thought he needed it but he just didn't and he found little work arounds for this and that.

Now if you need to get a map up or something like that it's there but the the convenience sometimes is is less than the actual cost of having that and so often we don't always count the time as well too that we lose on some of these items. We only look at the dollar cost and I really want us to think about the time cost as well because so often we are more than happy to waste hours upon hours to save a couple of dollars rather than really thinking about what's this costing me in time and we can't get time back. You can make more money, you can do other things around money, but you can't do things around time.

We've all got 24 hours in the day, and sometimes it's it's how we spend that that's the most valuable. So we just really need to be thinking about that.

So if you've got your values, you've defined your values, then we could talk about well, what does it cost to actually get those to to work towards those values. So eating healthy and things like that, What does that do to impact your grocery bill where you want to live? Does that impact your cost as well too? Is where you want to live more important than say, your health? Is it actually better to have a smaller place that's closer to somewhere where you need to be And this is where we need to start thinking about the cost of what of our decisions or the costs of what we're actually getting into as well to, I'll use another

example, a couple I was talking to a little while back. We're talking about the difference between renting and owning a house. And look everyone has has their own ideas around that. But a lot of times and I've heard this time and time again, rent is dead money rent is not dead money. Rent is is living and and there's a cost to living where whether you own a home or not. And so sometimes people don't always think about that. I've got to get a house as soon as possible or and this is what they were struggling with they were renting friends of theirs that brought and they were sort of feeling like

am I falling behind. But we started looking at the numbers was like well how much actually spending on rent and they weren't spending heaps on rent. It was actually they were they found a good place it was close to where they needed to be and for them it was this was this worked really well for them at this point in time in their life. It might change down the track, but for now, this was fine. But they felt like they were wasting money because they were renting.

And so I said, well, let's run some numbers. If we were to buy, how much interest would you pay to the bank? And that never really thought about that. But it's it. When you buy and you, you've got a debt, you've gotta obviously pay interest. Well, that interest goes to the bank. And so it's that interest is similar to what you'd pay in rent, Or if it's more than you're paying rent and it's actually forcing you to work longer or take on a more stressful job and things like that, is that actually worth it? Are you actually getting what you need out of it? So we talked about the fact that because they were spending less on rent than they would have been making repayments are actually able to save. And so they're actually putting money aside

now. They've got a little nest egg over here that's actually there and gives them some flexibility. So now they don't have as much concern if one of them has to stop work for sickness or things like that. They've they've got something to fall on where if they had a mortgage and they were living week to week and someone got sick, what's going to happen? How are they going to combat that? So for them, it gave them this flexibility. And so we talked through, well, let's think about the costs of home ownership as opposed to renting. And you've got, you've got mortgage repayments, you've got rates, you've got insurance and all of these things. And sometimes in life, that may not actually be the best thing for you.

Other times having that certainty of ownership is really important as well too. So I'm not discounting that. But this idea that this is what everyone has to do or this is what I have to do, I think sometimes limits our options and limits our way of how we can look at what we do and how we do it. So when we're thinking about our expenses, I really want us to be thinking through that is, is this actually what I need? Do I need the top tier of Netflix and four screens for everyone? Or is that just creating everyone to go off and watch Netflix in their own room rather than us maybe watching TV as a family or not not watching TV at all.

And so I don't use that as a small example, but there are, there are lots of examples like that out there where you've really gotta come back to looking at it, saying where am I actually spending the money on? And we've actually, we'll include a link to a little spreadsheet that we've got that you can actually start putting in your costs. So you can actually go, well, this is how much I spend on this per week or this is how much I spend per month on this. And I think it's really good to actually get to know the numbers, not not living them every day. I think that actually I say this coming from a finance background that you know I enjoy the numbers but that's I know not everyone

1000 some people feel like it's death by numbers but I think knowing some numbers is actually really helpful. So I think going through that process of setting that budget and saying well what are our expenses and where do they lie and it and it's the same whether you're it's you're personally or for the business as well. So actually going through and saying what are we spending on and is it actually giving us the value we need. An example I'll use is people look at like rising energy costs and some people have gone to put solar on while solar can offset that that cost as well. So I'm not saying you have to go out and put solar on, but some people don't look at solar as an investment or as a cost

reduction measure down the track. They just say it is, well that's a cost. Yeah, it it might be nice. But there's there's other people I know that would go out and and get a tax return of you know, a tax refund of $1500 to grant and not even think twice about what they spend it on. It's like free money but actually saying, well, what? How can I redeploy that money to reduce other costs? What can I do to make life easier? How can I respond that so I get a return on my money. And I think that's you've gotta come from that aspect of if you're spending money, what are you actually getting for it? And a lot of times you don't always look at the return

what we're spending on and I sound like an account saying that, but there is a real element to that that sometimes we spend without thinking or spend on areas that that aren't actually giving us the value or meeting our values at the end of the day. And that's what's really important. What do you value, and is it spending? So go through your expenses, have a look at them, go through them with a fine tooth comb and really start to say do I need that or do I want that? Is that actually life giving or is it actually a little bit life taking as well too? Is it actually costing me not only money

the time as well and so be really be really intentional about that. The other thing is when you get to some of these expenses don't always think of things as a fixed cost. So we look at energy and say it's a fixed cost. Yes, it's a fixed cost, but it's also a fixed cost if you never go and talk to your energy provider about a lower rate or a better deal or find another energy provider. And I I look there's there's the rare scenarios where someone will call up and say, hey I think I've got a better deal for you here or I think I've got a better interest rate for you on your mortgage. But most times they're not going to do that and that's known as the lazy tax

so to speak and it's there for people who don't go out and actively look for a better deal. If you stay in the same thing it will cost more overtime. You've gotta be actively involved and I think sometimes people don't realise that being a little bit actively involved could save them two or three grand. And it may seem like oh that's a bit hard work to make a few phone calls but if you could sit down for three hours and find savings of two or three grand you're basically making $1000 an hour for that effort and that work. But people don't always see it that way. And so but that's there's some of the things that you need to be active in and and you can only be active

if you know the numbers. And that's why I'm I'm gonna keep saying that know the numbers because so many people I talk to don't always know the numbers or don't always know what the better deal is or take the time and actually look for a better deal. And so it it is really about saying we've got to get back to knowing the numbers when it comes to expenses of where we're spending it on and is it giving us failure. So that is one of the big things that's when it comes to cost of living and expenses.

But hopefully that gives you a bit better thought process around writing your values, writing down your expenses and thinking them in terms of your values and making sure that they're actually meeting your values. And look, not every expense will always make your values. And unfortunately there are things that we do need to, we may need to spend money on. So if it's don't go and cancel your private health insurance because you're healthy, you still might need that if something goes wrong down the track. So not every expense you just want to go and cut straight away but there are plenty of little things that we can think about or ways that we can approach differently what we do

and and then that that gives us a bit of a bit of a different perspective. And I think that in the when we're talking cost of living, what is it to live for me, what does it mean to live for me? What what do I really value Adam in this important to me that that's part of that.

So that's one aspect of cost of living is the expenses, but the other side is income. So it's really thinking about or how do I create more income. And this is this is very much a personal thing for each individual and some of it comes back to skill level, the job role you're in, the responsibilities you're taking on. If you're a business owner, it's thinking about well what are the different ways I can actually generate income as well too. So is that more sales, is that building a better value product? Is that servicing clients better? Is it looking for efficiencies on delivering those products. So there are lots of ways that

you can generate income in a better way. And so I'm going to work through just a few little few little strategies around income and how to look at income. But also to what we want to do is get clear on our expenses first because that can also drive some of our income. And if we're clear on our expenses, what we want to be able to do is say, well, if we've got these expenses we want to be saving about 10%, we need at least this much income. And and sometimes we start with the income 1st and say, well, what can we afford. And I think that's that's a bit of a fallacy scenario around thinking, well, if I think about what I can afford as income goes up,

then I'll think about what can I afford as income goes up. And a lot of times when we see the I, I see this regularly as as income goes up and I'm guilty of it as much as the next person sometimes is that spending goes up as well. We don't always think about well what's the opportunity in terms of that increase not to spend more or to upgrade or to get this but how does it give us more flexibility or more savings or more ways that we can restructure our finances Or does it. It's just thinking about it differently and saying well if I've got more money do I just really do I add more expenses

or do I look at how this gives me an opportunity to get ahead to change my outcome where where I could be in a couple of years time. So when we're thinking about income I want I want it to be separate from expenses because I think when we look at it income 1st and then expenses we will always spend what we earn. But if we start with the expenses 1st and then say well neither the least this much and then if I've got more that can pay down debt or it can go towards savings or it can go towards investing. It's a different way of looking at it and and it's just some of this is around perspective. I'm not saying it's a it's gonna fix everything, but our perspective and our attitude towards money,

very important in terms of when it comes to budgeting, when it comes to spending, when it comes to making future decisions as well too. So that's that's what I want you to think about there in terms of income strategies. So one of the things is when you're looking at what if I'm working, how can I increase my income and that could come down to taking on more responsibility, taking on a greater role within the organisation you're in. It may be switching jobs, but I wouldn't rush out to switch jobs. I would have a conversation with whoever you're employed with as well to if you like, where you're working.

Sometimes the grass isn't always greener on the other side and and you don't always know what extra work or stress you might get from switching jobs or it might be the reverse as well too. So one is it's it's looking at your options around your employment and saying well where can I go, what can I do. The other thing is saying, well with my skills can I upskill, can I change jobs, can I get two part time jobs rather than one full-time job and does that give me more flexibility as well too. So it's really thinking around what you want from that job and are you willing to take on, do you want to take on more

or responsibility and more work or do you actually want to simplify the expenses so you don't have to worry about that? And that might be another way of looking at it from a business side. I mean, it's really thinking through well, is this the only revenue stream I've got? If it's the only revenue stream, if there's only one product you sell, can you add another product? So can you add another revenue stream? Can you go up or down the supply chain as well too? So sometimes it might be that you've got products, but can you also deliver the product? And so all of a sudden you're now the delivery person as well too,

which opens up a new revenue stream or it could be back up the manufacturing line. Can you, can you do something else with the product prior to you getting it and delivering it to the customer there

adds to the value chain, but also to adds to your revenue stream because you're not paying someone else to do it. So it's really that's that's one of the ways to do it. The other way is just to to obviously get more clients, get more customers, so sell more. And there's different strategies around that. It could be more marketing, it could be going into new geographic locations. It could be thinking about where your business comes from and if you can get it from another source or whether you can focus more on that source where where where you get your business from. So there are many opportunities around that to to think differently or think of different ways that you can get it

get incoming. But that won't happen unless you actually take action towards it as well too. There's no unfortunately there's no just quick fix to some of these things. It's actually taking that active role in it. So if I go back to being an employee it's taking an active role to go and and and upskill yourself and it may not be provided, it may be provided by your employer. It's always worth asking but also to saying well if I want to if I want to change jobs if I wanna do this I I need to actually take an active role in as well to if I sit back no one no one's necessarily going to come and offer it to me And so it's

it's really taking those proactive steps around either generating more income or generating different sources of income as well too. So that's some of the things to think about. So look we've talked a lot today but look the take home message is is start with what you value and let that then drive your other choices. Don't let don't let the rising costs of expenses be this thing that means you have to go out and work harder work longer, work more let let your let the life you want then dictate the income you need to get there

and and be really honest with yourself about what you want. Cause everyone everyone probably has this idea of OHP it's this or it's that where ask yourself that is that something that's coming from external or is it is it you that really wants that and a lot of times it can be external factors that are sending us down a road rather than actually internally. This is really what I want and I'm really proud to make that decision to make that choice and and to do that thing. So hopefully that's giving you something to think about. So start with your values think about the costs and the real costs around it. Do the actual numbers and I know that seems like

that works sometimes but doing the numbers and especially your numbers person, but do the numbers and really understand what it's costing you to, to make some of these decisions or have some of these things in your life. And then finally I'm thinking through the income around supporting that expense and supporting that lifestyle. So hopefully that's giving you some tools and some things to think about. As always, ask questions, go go seek professional help if you need as well to go through someone's ear off if that helps as well. But I would say we've got professionals, we've got different ways of looking at things and and different perspectives and tools to help you run the numbers. But

that really is understanding what you want and and how to get that. I hope that helps. I hope people, I hope you're you're able to think a little bit differently about cost of living crisis and hopefully don't lose yourself in all of the media noise as well too. But really talk about what it means for you as an individual. Alright, we'll see you next time. Thank you.