Managing financial stress and the inflated cost of living in retirement

Retiring comfortably now sounds almost like a pipe dream for Australians as the rising cost of living continues to place further stress on the purse strings. Many are finding it stressful enough to afford rent and groceries, let alone making their dreams of a grey nomad lifestyle come true. Money stress can take its toll on your health, so if you’re feeling the pinch as the cash rate rises, keep reading as financial experts weigh in on how to deal with the inflated cost of living.

Downsize your home

Unfortunately, precious memories of happier times don’t pay the bills and while your forever home may be where you want to live out your days, selling your home and downsizing or moving in with family could be a huge money saver. It will provide you with an increased cash flow that allows you to clear your debts, invest to generate a passive income or have the freedom to buy the little luxuries in life. There are other advantages to a smaller home, they are easier to maintain, less cleaning, usually cheaper to insure and lower electricity bills. You may even have enough left over to take that long-awaited cruise.

As of July 1 2022, eligible individuals 60 years and older can opt to sell their home and use up to $300,000 per person ($600,000 per couple) from the sale to contribute towards their superannuation. In August, a proposal to drop the age to 55 years was introduced, but this is yet to become law. However, something to be mindful about.

Find a roommate or two

Not eligible to downsize? Take advantage of additional bedrooms and get a roommate or an international student to help share the bills. In addition to paying for letting a room, they can contribute to the cost of the internet, water, electricity and even help with food. Plus, if you don’t have friends and family close by, you might even make a new lifetime friend.

Don’t forget that live-in landlords can be eligible for tax deductions such as insurances, body corp. fees, water rates and even council rates.

Apply for government assistance

If you’re a small business owner, you may be eligible for one of the many small business grants for 2022-2023. You may be awarded up to 50K to use for marketing or upgrading the technology side of your business. Providing you meet the stringent eligibility requirements for the state you live in, solo entrepreneurs and small businesses could get a financial helping hand that’s going to relieve some of the stress. You’ll find a list of grants and program incentives at business.gov.au.

Debt Avalanche Method

If you are still carrying debt, such as credit card bills, overdrafts or loans, use your remaining years of being employed to clear these up. Continue to make minimum payments for all your bills but choose one with the highest interest rate and do your best to pay this one off to completion as fast as possible. Then use the money you would have put towards that bill, plus the minimum payment towards your next highest interest rate debt, and so on. This is the fastest and cheapest way to knock off your debt.

Decluttering for cash

If you’re going to downsize your house, you’re going to need to reduce the amount of ‘stuff’ you have too. Do you really need to be a two-car family? You could also go from room to room and declutter. You never know what you’re going to find— a first-edition book of The Famous Five could fetch between $8,000 to $10,000. With the Queen’s passing, check all your coins because the 2013 Coronation $2 coin is now selling for $75-$185 depending on the condition.

Gerry Incollingo is the Managing Partner of LCI Partners, a firm that specialises in accounting advisory, lending, wealth, property, insurance and legal.

IMPORTANT LEGAL INFO This article is of a general nature and FYI only, because it doesn’t take into account your financial or legal situation, objectives or needs. That means it’s not financial product or legal advice and shouldn’t be relied upon as if it is. Before making a financial or legal decision, you should work out if the info is appropriate for your situation and get independent, licensed financial services or legal advice.