The UK is in the middle of a once-in-a-generation cost of living crisis, brought on by a variety of factors – from the coronavirus pandemic to shortages of fuel and corresponding rises in fuel price. Together with the increasing price of household goods and services, these have contributed heavily to an overall increase in inflation, which has risen to its highest level in 30 years.
The UK’s inflation rate currently lies at 5.4%. Coupled with a National Insurance increase or 1.25 percentage points, the inflation rate threatens to increase yet further, and poses a threat to households across the country; household running costs increase, while stagnating wages make incomes stretch that little less further each month. So, how can the average household lessen the impact of inflation in the short and long term?
Plan Your Finances
Getting a handle on your finances should be your first step. Discerning exactly how much you or your household brings in each month, and exactly how much is spent, gives a clear idea of your financial situation, and can illustrate areas where your money might be more easily saved. For example, you might discover that you are spending a significant amount on petrol for your car – spurring you to take more public transport, and save fuel costs as a result. Plotting your expenditures over several months will reveal trends, enabling you to modify your spending habits to save more.
Seek Out Offers and Exclusive Benefits
One good habit you can adopt with regard to spending is that of seeking out discounts and deals where you can. Shopping at a cheaper supermarket is a sure-fire way to bring down weekly costs, but shopping around to find deals on one-off purchases can pay dividends.
You may also be able to take advantage of benefits exclusive to you, for example via your work. As an NHS worker, you can use NHS discounts to cut costs at a variety of locations. Alternatively, if you are in higher education, even part time, you can use a student discount program. Your business might even have an agreement with local businesses to offer discounts to employees.
Buy Assets (Rather than Rent)
While rising property prices have priced many out of getting onto the housing ladder, buying a house remains one of the best ways to weather the effects of inflation. In general, buying property assets amounts to a form of investment; where renting sees a regular amount of money spent on short-term lodgings, paying a mortgage represents the buying of equity in a home.
More importantly for the inflation crisis, property is one of the safest investments you can make, with the highest yield. As inflation continues, the pound’s purchasing power decreases – and over time, that decrease becomes significant. Simply holding on to that money results in you effectively losing its value over time, where investing in a property asset protects the value of your money, returning you an amount proportional to the time at which you sell.
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