5 Proven Ways to Beat the Rising Cost of Living in 2025

The cost of living has reached a 20-year peak in Australia, with inflation climbing to 5.1% in early 2022. Many Australians are now experiencing ‘bill shock’—that unwelcome surprise when monthly expenses far exceed expectations.

As energy prices climb and essential goods become more expensive, households across the country are feeling the financial pressure. The cash rate rose dramatically from 0.1% to 3.1% in 2021, while everyday expenses continue to increase. Furthermore, seemingly minor energy wastage, such as appliances left on standby, can surprisingly account for up to 10% of a home’s energy consumption. Consequently, effective financial planning has become essential for navigating this challenging economic landscape.

This article presents five proven strategies to help Australians manage the rising cost of living. From practical budgeting techniques to smart shopping habits and seeking appropriate support, these approaches offer realistic solutions for households struggling to make ends meet in today’s economy.

Track and Review Your Budget

Building a clear picture of your finances forms the foundation of managing the rising cost of living. Establishing and maintaining a budget offers visibility into your spending patterns and helps identify opportunities to adapt during financially challenging times.

Regular budget tracking provides a comprehensive view of your financial situation, allowing you to monitor and adjust your spending as prices increase. When done consistently, budget reviews reveal the peaks and troughs of your cash flow, helping you prepare for periods when money may be tight. This practice is especially valuable during times of inflation and rising costs, as it establishes a new benchmark against which you can measure your financial performance.

The process involves more than simply noting expenses; it requires analysing your financial patterns and making informed decisions based on the data. Through consistent monitoring, you can:

• Identify variances between planned and actual spending
• Adapt quickly to changing financial circumstances
• Make proactive rather than reactive financial decisions
• Measure progress toward financial goals

Regular budget reviews transform your financial system from a historical record into a future-focused planning tool. Instead of merely documenting past spending, budget tracking enables you to anticipate expenses, prepare for seasonal variations in bills, and adjust your financial strategy accordingly.

Most importantly, regular financial reviews provide the agility needed to adapt to the rapidly changing economic environment. Monthly or quarterly budgeting allows households to reposition more quickly when faced with unexpected price increases or financial challenges. Additionally, reviewing your budget helps you maintain accountability to yourself and ensures that your financial plan remains realistic as circumstances change.

Implementing an effective budget tracking system for financial planning involves several key steps:

1. Create a baseline budget – Begin by listing all income sources in one column and all expenses in another—Categorise expenses as either essential or non-essential to identify potential areas for reduction.
2. Choose your tracking method – Select a method that suits your preferences:
   • Digital tools: Budgeting apps that automatically categorise expenses (53.8% of budgeters track expenses manually, while 20.9% use budgeting apps)
   • Spreadsheets: MoneySmart offers free budget planner templates that can be saved across devices
   • Banking tools: Many banks now offer built-in tracking features that categorise spending automatically
3. Set up a review schedule – Monthly reviews work well for most households, allowing you to identify issues before they become significant problems. Quarterly reviews are ideal for reassessing larger financial goals.
4. Automate where possible – Consider setting up a system similar to the three-account example, with automatic transfers on payday to reduce the temptation to overspend.
5. Monitor for variances – During reviews, pay special attention to areas where actual spending differs significantly from planned amounts. These variances often reveal opportunities for adjustment.
6. Adapt and adjust – Modify your budget as circumstances change. If you receive a pay rise, face new expenses, or want to reach different savings goals, update your budget accordingly.
7. Use visual tools – Many budgeting platforms present your financial data in charts or graphs, making it easier to analyse spending patterns and identify improvement areas.

The implementation process should also include regular goal setting. According to research, 45% of budgeters include specific financial goals as part of their strategy. These objectives provide direction and motivation, making it easier to prioritise spending and maintain commitment to your budget.

Cut Grocery and Utility Costs

Groceries and utilities typically account for the most significant portion of a household’s monthly expenses. Tackling these costs provides an immediate opportunity to free up funds for other essentials amid the rising cost of living.

For many Australian households, groceries and electricity bills are the areas where rising costs have the most significant impact. Indeed, the average Australian household spends approximately AUD 458.70 per week on groceries. This substantial expenditure has been notably affected by inflation over the past couple of years, making it a critical area for potential savings.

Similarly, utility costs continue to climb, with simple energy wastage adding considerably to household expenses. Most surprisingly, standby power—often referred to as “vampire power”—could be costing households up to AUD 152.90 per year. Moreover, seemingly minor adjustments to heating and cooling settings can yield substantial savings, as each degree lower in winter or higher in summer can reduce heating and cooling bills by up to 10%.

The combined impact of these expenses makes them prime targets for cost-cutting measures. Primarily, the goal is to maintain essential needs while eliminating waste and inefficiency.

To effectively reduce grocery costs and reduce the rising cost of living, consider implementing these proven strategies:

1. Plan meals and create shopping lists: Develop weekly meal plans based on what you already have and what’s on sale. 
2. Shop strategically: Compare prices across different stores and consider alternatives, such as Aldi, which has been consistently shown to be the most cost-effective supermarket through independent analysis. 
3. Switch to home brands: Home brand products have dramatically improved in quality and often score very well in taste tests while costing significantly less. Many staple items, such as sugar, flour, and rice, have virtually indistinguishable differences between brands.
4. Buy seasonally and bulk wisely: Purchase seasonal fruits and vegetables when they’re abundant and less expensive. For non-perishable items, buying in bulk can save significantly—for instance, a 10-pound bag of rice averages 50% less per serving than a 1-pound bag.
5. Reduce meat consumption: A study by Deakin University shows that eating less meat could save the average household up to AUD 2,752.18 every year. Try bulking out meat dishes with legumes or vegetables, which are generally cheaper and nutritionally beneficial.

For utility cost reduction, implement these techniques:

1. Manage standby power: Unplug chargers, gaming consoles, and kitchen appliances when not in use, or use a power board with an on/off switch to easily disconnect multiple devices simultaneously.
2. Optimise heating and cooling: Set your heater between 18-21°C in winter and your air conditioner between 23-26°C in summer. Before using air conditioning, try using fans, which use significantly less energy.
3. Improve energy efficiency: Seal gaps in doors and windows, use door snakes to block draughts, and be strategic with curtains—letting warm sun in during winter and blocking heat in summer.
4. Reduce water usage: Take shorter showers (4 minutes maximum), which can save the average household up to AUD 305.80 a year on water and energy bills. Fix dripping taps to avoid wasting hot water.
5. Use energy-efficient lighting: Switch to LED lightbulbs, which use 75% less energy and last up to 10 times longer than traditional bulbs. This simple swap could save up to AUD 24.46 per globe per year.
6. Consider “bill smoothing”: Many service providers offer the option to pay bills in smaller, regular amounts rather than large lump sums, helping to manage cash flow more effectively.

By combining these grocery and utility saving strategies, households can significantly reduce two of their largest expense categories. However, implementing these changes requires some initial effort and planning—typically two to three hours per week—the financial benefits make it worthwhile in the current economic climate.

Prioritise Essential Payments

In times of financial stress, knowing which bills to pay first becomes crucial for maintaining financial stability. With nearly half (47%) of respondents across countries reporting concerns about their ability to pay for essentials, establishing a clear payment hierarchy helps households navigate financial difficulties amid the rising cost of living.

Essential payments represent financial obligations that, if left unpaid, could result in serious consequences for households. These payments typically fall into three categories: commitments, everyday expenses, and occasional expenses.

Commitments form the cornerstone of essential payments—these are obligations with legal ramifications if neglected, including rent/mortgage, utilities, and loan repayments. Everyday expenses cover necessities like groceries, whilst occasional expenses encompass discretionary spending on items such as entertainment and fashion.

Primarily, housing payments should receive top priority, as maintaining shelter remains fundamental. After securing housing, utilities deserve attention, though some services offer flexibility—water companies cannot disconnect service in the same way electricity providers can.

Food represents yet another critical essential, albeit one with more flexibility in terms of adjustment. Households can temporarily modify their grocery lists to accommodate more pressing bills without compromising basic nutrition.

Failure to prioritise essential payments properly may lead to severe repercussions, including:

• Bailiff visits or court summons
• Bankruptcy proceedings
• Utility disconnections
• Home repossession
• In extreme cases, imprisonment (for certain obligations like Council Tax)

The challenge intensifies as the cost of living continues to rise, with many households struggling to meet all their financial obligations simultaneously. Under these circumstances, understanding which payments can be delayed versus those that must be paid immediately becomes crucial for financial survival.

To effectively prioritise your essential payments during periods of financial strain, follow these practical steps:

1. Create a comprehensive list of all obligations – Begin by listing every expense and bill due each month, including housing, utilities, food, transportation, insurance, debt payments, medical expenses, and childcare.
2. Categorise expenses by consequence of non-payment – Sort expenses into priority and non-priority categories based on the seriousness of consequences:
   • Priority debts: Mortgage/rent, utilities, council rates, tax obligations
   • Non-priority debts: Credit cards, personal loans, subscription services
3. Develop a payment hierarchy – Within your priority debts, establish a specific order:
   • Housing payments (rent/mortgage) come first to maintain shelter
   • Utility bills that could result in service disconnection
   • Food and essential transportation
   • Secured debts (where assets could be repossessed)
   • High-interest unsecured debts
4. Contact creditors proactively – Before missing payments, reach out to explain your situation. Many organisations have dedicated hardship teams and may offer:
   • Deferred repayments
   • Lower payment plans
   • Changed payment frequency
   • Reduced fees or penalties
   • Information about available assistance programmes
5. Identify flexible expenses – Determine which bills offer grace periods or flexibility.
6. Align payment timing with income – Where possible, schedule payment due dates to match when you receive income. This prevents overdrawn accounts and helps manage cash flow effectively.
7. Utilise available assistance – Only 33% of people feel confident that government assistance would be sufficient in times of financial trouble. Regardless, explore all support options, as 73% of respondents believe governments should prioritise helping people deal with rising living costs.
8. Create an emergency fund – This fund provides flexibility when prioritising payments during future financial challenges.
9. Consider consolidating debts – For those with multiple high-interest debts, consolidation may simplify payments and reduce overall interest costs. This approach works effectively when you qualify for lower interest rates on the consolidated debt.
10. Review and reassess regularly – Financial situations change, necessitating periodic review of payment priorities. Monthly assessment ensures your strategy remains appropriate as circumstances evolve.

For households already experiencing payment difficulties, immediate action proves crucial. The study reveals that 40% of vulnerable respondents would apply for loans or take on more debt when facing financial difficulties—a short-term solution that often compounds long-term problems. A more sustainable approach involves careful prioritisation combined with expense reduction and proactive communication with creditors.

Seek Financial Counselling and Support

Professional guidance can provide crucial support when the rising cost of living becomes overwhelming. Financial counselling offers a lifeline for those struggling with mounting bills and debts, providing expert advice without the burden of additional costs.

Financial counselling is a free, confidential and independent service provided by skilled professionals who help people navigate financial difficulties. Unlike financial advisers, financial counsellors work for not-for-profit community organisations and never charge fees. Primarily, these professionals assist with assessing your financial situation, negotiating with creditors, and developing strategies to manage debt.

Financial counsellors can assist with various challenges, including:

• Negotiating repayment arrangements with creditors
• Exploring eligibility for government assistance
• Applying for hardship variations
• Prioritising debts and preparing budgets
• Providing referrals to other support services

Importantly, the social and economic benefits of financial counselling extend beyond individual assistance. Research indicates that each AUD 1.53 spent on providing general financial counselling services generates an estimated AUD 5.66 to AUD 8.10 in benefits, demonstrating its value to both individuals and society.

Reduce Unnecessary Subscriptions and Spending

Subscription services have quietly become a significant drain on household finances. Currently, Australian households maintain an average of 3.2 subscriptions, with streaming video services accounting for most of these.

Monthly subscription costs often seem minimal in isolation—perhaps only AUD 15.29 to AUD 30.58 per service—nevertheless, these charges quickly accumulate as households sign up for multiple services. Many people continue paying for subscriptions they rarely use, losing track as automatic payments silently deduct funds each month.

What appears to be an insignificant monthly expense can actually represent substantial annual costs. Coupled with rising prices from service providers, these ongoing commitments can significantly impact financial stability. Without regular review, these “subscription traps” continue drawing funds indefinitely, even as household needs change.

To regain control of subscription costs:

• Conduct a subscription audit – Review bank statements to identify all recurring payments and assess which services genuinely provide value.
• Downgrade unnecessary tiers – Check if you’re paying for premium features you don’t need, such as high-resolution streaming that your television doesn’t support.
• Consider annual payments – Many services offer discounts of 20-30% for yearly subscriptions.
• Explore free alternatives – Public libraries provide free access to thousands of audiobooks, movies, and digital magazines.
• Implement a “one-in, one-out” policy – Before subscribing to anything new, cancel an existing service to maintain budget discipline.

Through systematic evaluation of subscription expenses, households can effectively reduce this increasingly significant aspect of the rising cost of living.

Conclusion – Cost of Living

The rising cost of living presents significant challenges for Australian households, yet effective strategies exist to navigate these difficult economic times. Each approach discussed provides practical ways to gain control over finances without compromising the quality of life. Tracking your budget serves as the foundation for financial awareness, revealing opportunities to adjust spending as circumstances change. Targeted reductions in grocery and utility expenses can yield substantial savings through simple habits, such as meal planning and managing standby power usage.

Establishing clear payment priorities becomes crucial when finances become tight, ensuring essential services remain intact while preventing serious consequences, such as eviction or utility disconnection. Professional guidance through free financial counselling provides invaluable support for those struggling with mounting bills, offering expert advice tailored to individual situations. Subscription services, though seemingly small individually, collectively drain household resources when left unmanaged.

Ultimately, beating the rising cost of living requires both immediate action and long-term planning. Economic challenges will undoubtedly persist, but households armed with practical strategies stand better equipped to weather financial pressures. The path forward may require adjustments and occasional sacrifices, yet maintaining financial stability remains achievable through deliberate choices and consistent effort. Australian households can face these challenges head-on, gradually building resilience against economic uncertainty while preserving what matters most.