How to beat inflation

Inflation is running high. The Bank of England has suggested it will pass the current 7% point later this year, and other observers have suggested double figures.

This level of inflation is painful. The discomfort starts with your weekly shop, when you discover that the items you bought last week cost more this. It gets much worse when the bills and particularly the energy bills come in.

Many households are struggling after the energy price cap was increased by an average of 54% to £1,971. The Consumer Prices Index recorded its biggest increase since 1992 on the back of rising food, clothing and restaurant costs. Prices surged by 7% in the 12 months to March as UK inflation hit its highest level in 30 years. 

But what makes it really excruciating is when you look at your savings and realise that the money you have put away is falling in value much faster than it is growing from the interest it earns.

At Continuum we are looking at ways to take the sting out of inflation, or even beat it altogether. 

 Making your money go further

You can’t do much about rising prices, but it may be possible to make your money stretch to cover more of the things you need.

Cut out anything that isn’t essential. Careful buying and budgeting could help your bank balance.

Of course, there are limits to the amount of savings you will be able to make by switching to own brands and cutting out the luxuries. You may be able to make some much more significant savings on your big bills – and especially your mortgage.

The increase in house prices may mean that you own a higher proportion of your home than you did when you bought it. This difference between the value of your property and the amount you owe on your mortgage is known as the loan to value ratio and can determine the rate you pay. Where there is a higher margin between the market price of your house and your mortgage, this could entitle you to a lower rate on your mortgage.

Contact us at Continuum about remortgaging. By paying off your existing home loan and switching to a new lender we may be able to help you substantially reduce your monthly mortgage bill – giving you more cash to spend elsewhere.

Making your money work harder

However painful the current financial situation may be, you cannot afford to ignore the future.

Inflation also affects your future finances – because the value of the cash you hold is falling fast. If you put it in a savings account, the returns are far below the rate of inflation, meaning that the value of your money measured in purchasing power will be much less when you come to draw it out.

You could – in fact should – look around for the best return on your savings, but even the best savings accounts cannot compete with 7% inflation.

The solution may be to start investing in the stock market.

This is much easier than many people think.

For most of us the first step is to open a Stocks and Shares ISA. You can put £20,000 into an ISA in the current tax year 2022/23, and you do not pay tax on the gains (return on your investments). But there is no reason to stop there. The stock market may have its ups and downs and there are no guarantees, but there are plenty of ways to build a portfolio aimed at providing potential growth which – unlike savings – may outpace inflation.

It has to be said that while investing in the long-term has the potential to grow your money, markets are always risky. You should invest with at least a five-year timeframe, and unless you are already an investment expert, getting advice from someone who is, could be vital. 

At Continuum we can help you put together an investment strategy that is designed around your needs, timescales and resources, and which could help you get your money growing again, whatever happens to inflation.

For expert help in looking at any aspect of your finances, from your mortgage to your investment portfolio, contact us at Continuum. Inflation is a threatening your money. A call to us could be the first step in fighting back.

The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable mortgage products or investment strategy, you should seek independent financial advice before embarking on any course of action.

The value of investments can fall as well as rise and you may get back less than you invested.

Your home may be repossessed if you do not keep up repayments on your mortgage. 

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