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1. Boost your budget

A periodic review of your budget is beneficial, as your goals and spending habits change over time, alongside price hikes that squeeze your budget tight. If you have never budgeted before, it's a great time to start evaluating your spending and building room for saving. Aim to track your money and identify the minimum amount you need to cover monthly expenses. Here are some simple ways to maintain control of your finances.

  • Separate your spending. Whether you use a budgeting app, spreadsheet or notebook, the aim is to accurately measure your spending against your goals. Consider three categories: essentials, non-essentials, and luxuries.
  • Set spending limits. Set a limit for each category, i.e., the 50-20-30 rule (50% essentials, 30% non-essentials and 20% luxuries) - the trick is to stick to it creating financial flexibility.
  • Remain committed: Benefit from budgeting by remaining committed to reducing regular spending and living within your means. If things aren't going as planned, readjust your goals, or switch up your spending, such as forgoing luxuries for essentials.
  • Ex expenses. Review your expenses to see if there is anything you can cut back or cancel, such as unwanted or unused gym membership, subscriptions, apps, or direct debits.

2. Shop smartly

Food shopping is one of the biggest areas of your finances you can influence, and with food prices rocketing due to inflation, it's time to shop savvier and smarter. Statistics reported in July that food prices on everything from bread and cereals were up by an annual 12.4% (milk, cheese, and eggs - 19.4%, and oils and fats - 23.4%). Unfortunately, food prices aren't likely to stop rising soon, so here are some top tips to save money on your trolley:

  • **Compare your costs.**UK averages can help you assess how your spending compares. According to the Office of National Statistics, the average UK household spends £3,601 on food and £1,744 on eating out annually, a total of £5,345 yearly or £103 weekly. If you are spending excess amounts on food, it's time to reevaluate your spending.
  • Stick to your shopping list. Shopping lists make shopping seamless, help you thwart temptations, and avoid aisles with unnecessary items.
  • Opt for cost-effective foods. Supermarket products are cheaper alternatives to well-known brands. For example, a box of Kellogg's Granola (350g) in Tesco's is £3.00, whereas a Tesco's-owned Granola (1KG) is £2.00 – much more for less. You can also benefit from buying staples such as pasta, canned goods, or toilet paper in bulk from stores like Costco.
  • Prep meals. Create a weekly meal plan to avoid impulse shopping or relying on takeouts. Try creating dishes with ingredients you already have at home to save more.

3. Trim transportation costs

Fuel has the biggest impact on inflation, with average petrol rising to 17.1%, the highest since 1977. However, there may be hope, as prices began to fall slightly in July. If funding fuel is blowing your budget, here are some ways to save:

  • Decrease driving or trim travel costs
  • Work from home more often (if permitted)
  • Do errands in batches or carpool.
  • Go electric
  • Cycle or walk anywhere within a short distance.
  • Use petrol station reward cards
  • Compare fuel before refilling.

4. Switch up your savings

Interest rates on savings accounts and cash ISAs have been unappealingly low for a long time, and many can't outpace inflation, providing little encouragement for savers. Higher inflation should feed through to higher savings rates; however, lenders don't always pass on interest rate increases to benefit savers. Here are some ways you can earn higher interest and reduce the eroding effects of inflation.

  • Earn on your emergency fund. We all need 3-6 months' worth of emergency savings accessible, but that doesn't mean accepting the lowest interest rate. Most high-street banks offer rates below 0.5% on easy-access accounts, whereas switching to a challenger bank could earn you much higher interest. For example, Aldermore at 1.70% or RCI bank at 1.67%.
  • Separate your savings. Many savers leave cash in easy-access accounts without much thought, but with woefully low-interest rates, it's wise to work out when (and if) you need your money and how much. You can put to work the money you don't need. For example, if you have £1,000 or more to put away for a year, consider a 1yr fixed rate bond and earn up to 3.11%
  • Opt for online. The best way to reduce the impact of inflation on your savings is to make it work harder; go for online savings accounts that offer more competitive rates than in-branch savings.
  • Get rewarded for saving. A Life-time individual savings is a great way to save for the future or purchase your first home. You can save up to £4,000 annually and receive a 25% bonus on your savings. So, for every £1,000 saved, a £250 bonus is applied. (Penalties and restrictions may apply)

5. Invest to Beat Inflation.

If you have a sum of money you can lock away for five years or more, investing in stocks and shares has the potential for inflation-beating returns. Over the last 35 years, research shows that the FTSE 100 achieved an average annual return of 7.75%. Investing doesn't mean taking big risks or investing all your savings. If you want to start investing, begin with a comfortable amount you can afford, and follow these basic investment principles to sway from sorrowful savings rates and protect your wealth.

  • Choose a risk profile that aligns with your investment experience.
  • Set aside an emergency fund
  • Opt for low-cost options
  • Diversify your funds
  • Keep track of investment performance
  • Avoid panicking

Bottom Line

Inflation happens and is a risk everyone faces. Money tends to lose value over time, and also the level of inflation in an economy changes depending on current events.

As consumers, however, there are many simple ways for us to hedge against inflation. Keeping some of these strategies in mind can help us survive (or even thrive) in spite of the economic climate.

About the Author

Makala Green, CFP

Makala Green, CFP

Freelance Contributor

Makala Green is a certified financial expert and author of the *The Money Edit:* a jargon-free and shame-free guide to making positive financial steps, no matter what stage of life you may be at. She also maintains the personal finance blog, The Wealth Check.

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