Manage your mortgage

Interest rates may have hit a 12-year high, but Phil Naylor, CEO of the Mortgage & Finance Association of Australia, warns homeowners not to panic, pointing out that refinancing is always an option. "About a third of people with mortgages will refinance," he says, adding that although there may be penalties for breaking your contract, making the switch may save money in the long run.

Meanwhile, Nayer maintains first homebuyers will need to carefully consider whether to opt for fixed term or floating interest rates. About one in three homebuyers choose fixed-rate loans, he says, adding that although this offers security, you might end up locked in to a comparatively high interest rate, "or the interest rate might have gone up so much that when you complete the fixed rate period it's quite a leap." Whichever you choose, now is not a good time to overstretch yourself. The Australian Securities & Investments Commission (ASIC) suggests your repayments should not be more than a third of your income.

Win the rental race

Tenants are also doing it tough. "Rents have increased by five per cent in the past year - which is above inflation," states Chris Martin of the Tenants' Union of NSW, explaining that with house prices rising, more people are renting for longer. Also, "silent auctions", where prospective tenants offer competitive rents, are increasingly common.

To beat the crowd, Martin advises waiting until after March to move - as demand is highest in the new year - and "to treat [finding a house] like a job interview". That means including a cover letter with your application and looking presentable when viewing homes. As a last resort, consider delaying your move as figures show landlords are increasing rents by 10 per cent every time properties hit the market.

Work your way up

With the unemployment rate at a record low, you've got "boss bargaining" power (which might not continue if recession hits), explains Alastair Ingham, a career counsellor for Hudson recruitment agency. He points to a recent poll that found 40 per cent of companies are currently trying to increase staff numbers. "That means your boss should be more inclined to help and retain you than give you the heave-ho."

If you are considering asking for a pay rise, Ingham advises arranging a meeting and offering up a "praise sandwich". That's where you state what you like about the job, calmly add what's bothering you, and then finish on a positive note.

Fight fuel hikes

Petrol prices may have risen by 15 per cent in the past year alone, but Australian Automobile Association spokesperson Greg Smith says there are plenty of ways to cut costs. For instance, buying petrol on a Tuesday can save up to 10 cents a litre. "In most major centres, there's a weekly price cycle", which peaks on a Thursday as costs rise before the weekend, but then drops until Tuesday as stations compete for customers. Buying a fuel-efficient car can also save about 30 per cent on costs, while properly pumping up tyres can conserve two to four per cent. "The way you drive your car makes a huge difference," adds Smith, explaining that accelerating more slowly - say, at 20km/h for five seconds - can save 11 per cent on fuel costs.

Decrease debt

With interest rates climbing, now is the time to clear your debts - especially if you're a homeowner facing higher mortgage repayments. First, says Carolyn Bond, of Consumer Credit Legal Services, draw up an action plan. ASIC's www.fido.gov.au has calculators and other tools to help deduce how much you owe, while www.infochoice.com.au can reveal whether your credit cards or accounts suit your spending habits. On the positive side, Susan Jackson, director of Women's Financial Network, says that while rate rises may mean mortgage hell for some homeowners, it's a bonus for those with savings. "That money should be earning more interest." She recommends opting for a high interest deposit account, such as ING Direct's Savings Maximiser.