How to Beat Inflation – Our Top Tips

With inflation in the UK currently at 9.9%, it’s little surprise that the impact of price rises is putting a significant financial strain on most households. Inflation is on the rise throughout the world but the UK is expected to experience faster price rises for longer than many developed economies. This has been caused by the war in Ukraine, shortages in the supply of goods and labour constraints due to the Covid pandemic and a reduced labour market following Britain leaving the EU.

Prices are rising at their fastest rate for decades with some economists predicting inflation may rise even further early next year. Despite the difficulties inflation causes, there are some strategies you can employ to mitigate the impact of rising prices. We’ve put together our top tips to help you beat inflation:

Tip: Invest some of your savings

With inflation so high, all savings are losing money in real terms. Even as interest rates rise, it’s unlikely that cash savings will keep pace with rising prices over the long-term. It’s often prudent to maintain cash savings in your ‘emergency fund’ equal to 3-6 months’ expenditure. You may want to consider investing any savings you are unlikely to spend in the next few years. This offers the potential for inflation-beating returns. Of course, it also comes with added risk, but over the long-term investing will almost always beat saving.

Tip: Keep Investing

When inflation shoots up, stock markets may suffer a short-term decline. Some people are quick to sell so they can avoid the risk of monetary loss. However, acting rashly and encashing some of your investment during a downturn will probably have a detrimental long-term effect on your returns. Instead, keep investing regularly and see this as an opportunity to invest when stocks are ‘on sale’ at a price that would normally not be available. Play the long game while maintaining emotional stability.

Tip: Trim any regular costs and ensure you have a household budget

Increasing prices will further restrict your spending if you are on a tight budget. Make sure you are getting the best price on the services you are paying for before making any cuts. Check your insurance policies, home broadband and phone contracts and other utilities. Contact your suppliers and ask for a better deal or consider changing supplier. Go through your credit card and bank statements and make sure you know what every item is. Consider cutting back on any non-essentials.

It’s also important to make and stick to a household budget. If you don’t yet have a budget, consider starting one. It needn’t be too complicated. Just note down (and stick) to a list of things you spend money on each month. Allocate specific funds for specific functions. Maybe separate out your ‘fun money’ and hold this in a separate account or in cash at the start of each month to ensure you don’t overspend.

Tip: Check benefits and tax-relief you may be entitled to

There are a lot of different government benefits that you may be entitled to. Now is a great time to double-check if you are missing out on free money from the government. This could include benefits for being a carer, benefits for children, council tax discounts, Universal Credit, Working Tax Credit and so on. Many local councils also offer grants and other free services to lower-income households.
There are also tax breaks that many people regularly miss out on. Tax-relief on pensions, using your ISA allowance and planning to mitigate Inheritance Tax are some great places to start.

Tip: Change what you buy at the supermarket

We’re all spending more and more on the weekly food shop. Check to see if there are any simple substitutions you can make when you visit the supermarket. Check the ‘world food’ aisle for some great discounts (and interesting foods) that may be cheaper than in other aisle of the same supermarket. Consider using more frozen vegetables and swapping fresh pasta for dried, for example, You might also be able to switch from name brands to own brands or from own brands to value supermarket brands.

Tip: Ask for a pay rise and/or get a side-hustle

Most people’s wages aren’t keeping up with inflation, but now may be a great time to ask for a pay rise. If your employer is currently recruiting, check the pay on offer, which could be a useful way of opening a conversation about a pay rise. If not, look at similar positions with different employers; if they advertise higher pay, you might be able to use that as support for your claim that you should be paid more.

Another idea is to think about earning more money with a ‘side hustle’. This is a way of earning additional money on top of your main employment. Some popular side hustles include selling arts and crafts online, using your skills to teach others in your community or online, joining the ‘gig economy’ by becoming a part-time delivery driver, starting a YouTube channel, walking dogs as a service in your community, completing online surveys for money or entering prize draws. Whatever you do to earn more money, a side hustle can often be a useful way to generate more income if you have the time to spare.

Tip: Don’t put off big purchases – but ask if you really need them

With prices rising at such a fast pace, it may be wise to purchase any ‘big ticket’ items you know you want to acquire as soon as possible in case the price increases. However, you should take care with this as prices are not rising evenly for all products. Televisions, for example, continue to fall in price, so some research is in order before you jump into making a big purchase.

It’s also worth thinking more carefully about whether major purchases are really necessary. Could you go without or could you pick up the same item for a fraction of the price second hand? Many of us buy things we don’t end up using very much. Now, more than ever, you need to be sure you’re getting good value and enough use out of every purchase you make.

Tip: Review your financial plan

If you have a financial plan in place, it’s important this is reviewed. With the significant increase in prices, it’s likely your plan will need to be adjusted and updated and your financial forecasts re-done over the coming months to ensure you remain on-track to meet your long-term financial goals. If you don’t yet have a financial plan in place, it may be worth employing an independent financial planner to help you put one together. In these uncertain times, it’s never been more important to have confidence your finances are in order and to have a plan in place.

Tip: Seek expert advice

Money and finances can be complicated at the best of times, but high inflation adds another layer of complexity. Rapidly rising prices cause real concern and worry for many people. It can be difficult to know if you’re taking the best action and aren’t missing any strategies to boost your finances and make the most of your money. Taking expert advice from an independent financial planner is often one of the best courses of action. They can sit down with you and go through every aspect of your finances to ensure you are in the best possible financial shape and have a plan in place to archive your financial and personal goals.

If you would like to talk about any of the issues in this article or need more general help with your finances, please get in touch with us.