Many could also be missing out on some fairly easy-to-implement savings.
According to the Australian Bureau of Statistics (ABS), average household debts skyrocketed from $94,100 in 2003-04 to $168,600 in 2015-16, listing around 1.9 million households as over-indebted based on a debt-to-income ratio. These rapid increases in debt are mostly accredited to home loans, credit cards and student loans.
Despite a recent plunge in discretionary spending, the Reserve Bank of Australia (RBA) reports that spending on essentials has remained steady – an indication that families may be cutting back on luxuries.
In 2018, the RBA announced its findings on household debt in its financial review. The review highlights Australia’s higher than average household debt-to-income ratio in comparison to countries like Canada, New Zealand and Sweden.
The ratio of household debt to income has increased by almost 30 percentage points over the past five years to almost 190 per cent.
In 2016, the average household spent an estimated $74,301 on general living costs, according to the Australian Securities and Investments Commission (ASIC).
ASIC uncovered the average weekly amounts spent on essentials by each life stage:
|Single person under 35||Couple (at least one person under 35)||Couple with kids (youngest child under 5)||Couple with kids (youngest child between 5-15)||Couple with kids (youngest child 15 and above)|
|Fuel & power||$24||$35||$48||$54||$53|
|Medical & health expenses||$23||$69||$85||$104||$110|
Source: ASIC MoneySmart, Australian Spending Habits
However, there are some ways households can claw some of their hard-earned cash back into their budget.
8 ways to save on the cost of living
Insurance expert and spokesperson for comparethemarket.com.au, Abigail Koch, understands the frustration that many Australians have around the rising cost of living.
“It’s crucial for consumers to question the surcharges they receive and understand why they were stung with extra costs in the first place. Knowledge is power so talk to your energy provider, the hotel staff or even your bank and gather as much information as possible to avoid paying hundreds of dollars a year in unnecessary fees,” Abigail Koch said.
Abigail suggest the following tips on common products and services to be aware of.
- Car insurance: Motorists who pay car insurance premiums annually in advance as opposed to monthly can save up to $160 a year. A recent comparison by comparethemarket.com.au uncovered that customers could save anywhere from $6 to $160 by opting to pay their car insurance policy in one annual lump sum.
- Health insurance: Aussies could unknowingly be forking out $900 extra in tax a year. The Medicare Levy Surcharge is a levy paid by taxpayers who do not have private hospital cover and who earn above $90,000 as a single or $180,000 as a couple or family. Given that Australia’s median household income is $84,032 per annum, more families may be close to falling into this higher taxed threshold. However, obtaining a suitable level of hospital cover could nullify having to pay more in taxes every year.
- Electricity: Standby power is a silent contributor to many household energy bills. In fact, it’s responsible for up to 10% of power bills. A household which pays $1,200 a year for energy could be saving $120 annually. A recent survey commissioned by comparethemarket.com.au found that almost one in three respondents were not aware of this, while more than half kept their appliances on standby rather than switching them off at the wall.
- Credit cards: There are multiple hidden fees attached to credit cards which can be easily overlooked. Common fees charged by banks include duplicate statement fees, international transaction fees, withdrawal fees and inactivity fees. Prices vary between credit card lenders; with some sneakily charging small amounts that often go undetected on bank statements.
- Road tolls: Aside from standard toll road costs, there are additional fees to keep an eye out for, including dishonour fees, overdue interest charges, account suspension fees and vehicle matching fees. It’s worth scanning bills thoroughly to ensure no bonus charges have been added to an invoice.
- Travel: Whether it’s for business or leisure, financing a trip away is expensive enough without factoring in unexpected travel costs. Local taxes, customary tipping, foreign transaction fees, Wi-Fi or concierge services, and even minibar costs are all unforeseen extras that could be added to a bill.
- Ridesharing apps: Not only can rideshare apps like Uber increase rates during busier periods, some rideshare businesses will also charge customers for cancelling a booking after two minutes of ordering it. Other instances of additional charges include driver waiting at pickup locations for extended periods of time, and how far the driver has travelled to reach the destination.
- Public holiday surcharges: Bars, cafes, restaurants and other small businesses, may charge customers up to 10 to 15% more on top of their bill during public holidays. It is customary for many businesses to apply surcharges on goods and services to cover their staff’s higher penalty rates on holidays such as Easter and Christmas.