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Why financial planning is so important in times of high inflation

4 Minute Read

Post-COVID, the economy has certainly experienced some turbulent times, and one of the flow-on effects that we are now experiencing is high inflation.

Inflation is a general increase in the prices of goods and services in an economy over time. When inflation is high, the purchasing power of money decreases, meaning that the same amount of money can buy less goods and services.

When prices are rising rapidly, as they have in the past few years, it can be difficult to maintain our same standard of living, particularly if your income hasn’t increased at the same rate as inflation (and for many people, it hasn’t).

To compensate, belt buckles need to be tightened, and this is precisely what the RBA are wanting us to do by increasing the interest rates so quickly in recent times.

In inflationary periods, the role of financial planning is perhaps more important than ever. Having a tailored strategy is imperative for those wanting to mitigate the negative effects of inflation on their finances and maintain their standard of living. Further, despite the challenges that inflation brings, there are plenty of opportunities to be considered too, and of course your financial plan should help you take advantage of these.

There are several ways that financial planning can help your financial position in times of high inflation:


Asset prices

In the short-term, inflation can cause the value of assets to be volatile. However, long-term, assets such as real estate, infrastructure, shares and commodities should rise and thus offset the impact of higher inflation. Financial advice can help you to decide where to invest for the long term, but balance this with maintaining your standard of living today.


Debt management

As interest rates increase, which happens during periods of inflation, the cost of borrowing money will also increase, making it more difficult to repay debts such as mortgages. A financial plan can help to minimise, and ideally lower, borrowing costs by restructuring debts and ensuring the correct prioritisation of debt repayments. Often a tailored financial plan can help to improve the tax deductibility of debt also, which again lowers your out-of-pocket costs relating to debt.



Inflation leads to increased living costs, with our day-to-day expenses like food, housing and healthcare all rising. A financial plan helps you to create a budget that accounts for these higher costs, making sure you can adjust spending accordingly if required. Financial planning can also provide ideas and strategies for where income can be increased to offset inflation.


Retirement planning

Inflation can erode the value of retirement savings over long periods of time. As a result, it is very important that your financial plan incorporates strategies to mitigate the long-term impact of higher inflation, and ensures that your retirement income keeps up with inflation. Your financial plan needs to incorporate research on different spending habits in retirements also, which will ensure you have enough money to live the life you want to live.


Allocation of savings

Inflation also erodes the value of our savings, so a tailored financial plan needs to help re-redirect savings, as appropriate, to other asset classes that will keep up with inflation, and thus better protect your wealth.


Tax minimisation

In higher inflation environments, salaries do tend to increase too, often pushing people into new tax brackets, which can lead to increased taxes. Financial planning can help to review your tax position over time to ensure you are taking advantage of all the appropriate tax minimisation strategies that are available.


Insurance premiums

Life, disability and income protection premiums, much like most other expenses, also jump up during times of higher inflation. As part of your financial planning, your insurance needs need to be regularly reviewed – the delicate balance between minimising expenses and ensuring appropriate coverage is key. Insurers tend to automatically increase not only your cost but your cover each year, even if increased covered isn’t needed, which obviously really adds to cost increases during inflation. Reviewing your insurance needs annually as part of your financial planning is therefore important. It is, of course, worth noting that an Independent Adviser won’t be charging commissions on your personal insurances, which can help to decrease costs at this time also.


Diversification & asset allocation

In higher inflation periods, different assets tend to do better than in lower inflation periods. A well-diversified investment portfolio that includes other asset classes on top of the usual residential property and shares is critical to generate and protect wealth.


Ultimately, financial planning needs to represent an investment, and not a cost. This is particularly true in times of higher inflation, where we are all more mindful of the money we are spending. Your financial plan needs to strike the right balance between preserving your present lifestyle and ensuring you remain on track to achieve your long-term financial goals.

 If you need help on this front, or want any further clarification on this article, please don’t hesitate to reach out to our team on 07 3667 7260 or via info@oxlade.com.au. Our experienced Advisers have helped hundreds of clients navigate and prosper during periods of market volatility, so they are more than happy to answer any questions you may have, or of course to assist you with tailored financial planning.



Any information in this article is general in nature and does not consider any of your personal objectives, financial situation and needs. It is as intended, to be of a general nature only and NOT a recommendation to you. You should consider whether the information is appropriate to your needs, and where appropriate, seek personal advice from a registered financial adviser.

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