• Concerns many Australians are halting long-term investing goals due to rising costs of living and market volatility
  • A leading financial adviser believes Australians should try to keep their long-term financial goals on track
  • There are three key levers investors can use to maintain investing goals amid rising costs of living and market uncertainty

It’s easy to get despondent with financial news at the moment. Australia is experiencing rising costs of living and record levels of inflation as a result of flow-on effects from the Covid-19 pandemic, war in Ukraine and consumer demand.

Australia’s inflation rate is 6.1%, the highest recorded since 1990. Prices for food, fuel, insurance and everyday costs of living are on the up, while the RBA is hiking interest rates to put the inflation genie back in the bottle but on the flipside increasing mortgage stress.

However, while many Australians are tossing and turning at night considering how to make their precious money go further the Association of Financial Advisers (AFA) national practitioner chair and AFA Group Wealth founder John Cachia warns they should not sacrifice their long-term goals.

“As costs of living are rising people find themselves getting fearful and worried and because of that they are moving away from focusing on their long term financial goals,” Cachia told Stockhead.

“People are scared to put money away for the long-term because they feel they need it right now along with concerns about market volatility.”

Decisions today have long-term repercussions

Cachia said the initial fall in share markets as the Covid-19 pandemic gripped the world in 2020 and its subsequent rally saw many novice retail investors jump into investing, often for the first time but with no real plan or experience.

“For people who are less experienced with investing as markets are rising, they want to jump in with FOMO and as they are falling want to get out – both not necessarily good moves,” he said.

Cachia said people need to remember financial decisions made today for today can be detrimental to long-term plans with even more experienced investors or those guided by financial planners feeling jittery.

“People are thinking ‘I will stop putting money into that ETF strategy’ which is what you shouldn’t be doing because that is what you did with a clear, logical mind to get to where you want to go,” he said.

“People still need to look long term at their goals like when they want to retire, pay off their debts and make logical decisions with those goals in mind,” he said.

“So many people, because of the fear of what is happening right now, are deviating from their plans and might be scaling back their investment but if that is what is needed to reach their long-term goals, then it’s not the right move.”

Pull three key levers to stay on track

Cachia focuses on educating his clients about what they can and can’t control and how not to act emotionally during  economic instability and market volatility.

He said Australians should look at  “three key levers they can pull”  to help alleviate cost of living pressures.

1. Increase income

Cachia said firstly try to work out a way to boost income in your household.

“You can get a side hustle, pick up an extra day at work, change jobs, seek a promotion,” he said.

2. Revise expenses

He said revising expenses is crucial in trying to make your dollar go further.

“People need to ask themselves if they need to be having Uber Eats twice a week or going out to a restaurant each week and look at what they can control first before they adjust their financial and investing plans,” he said.

“Do you need to go on expensive holidays every year or can it be cut back?”

3. Take on more risk

Cachia said when it comes to current volatile environments, people tend to look at decreasing their risks and moving to safe assets like cash and fixed income investments, sometimes selling growth assets to do so.

“Are you just banking your loss or putting your assets in a position not to reach your long-terms goals?” he asks.

“Before doing anything you need to consider the effects actions will have on your long-term plans and find the right asset allocation mix to achieve your long-term goals while allowing you to still sleep at night.

“We don’t really like having to take on more risk but you can do it, for example, if you are too conservative it may ultimately lead to you not achieving your long-term goals.”

But Cachia said there are warnings on taking more risk and investors need to understand and be guided on what they are doing.

And when markets get a little too volatile you can always try yoga.

The views, information, or opinions expressed in the interview in this article are solely those of the interviewee and do not represent the views of Stockhead. Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.