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4 Ways to Fight Inflation

Have you felt like everything looks more expensive nowadays? No, unfortunately, you're not imagining things. Thanks to inflation, the pound isn’t going as far as it used to in the past. The number on the price tag keeps getting bigger, but the products and services you consume are still the same size.

According to Trading Economics, the consumer price inflation rate in the UK increased to 10,10% in the 12 months to July, being the highest in 40 years.

Besides this, the Bank of England increased interest rates from 0.50% to 2.25% last week. Even though this is the highest level in 14 years, the rates could reach 6% next year, based on the prices investors are paying to borrow money, according to Bloomberg. This means that from the third of households in the UK that have a mortgage, around 2.2 million homeowners will have their monthly repayments impacted. 

Regardless of what your monetary situation is at the moment, it’s essential to reevaluate your financial decisions to ensure they align with your personal goals.

But how can you fight inflation as a consumer? Continue to read below to discover a few actions you can take to combat this silent budget killer.



1. Start - or continue - investing

One way to keep up with inflation - or even outpace it! - is to invest

Passive index investing is the most effortless way to do this. Fortunately for beginner investors, it doesn't rely on a talent for stock-picking and it guarantees you end up with a diverse portfolio.

Remember when Covid-19 hit? Because everyone was working from home, tech companies, like Zoom or Microsoft, enjoyed profits of $882.5 million and $143 billion, respectively, in 2020 (an increase of 370% compared to the same period in 2019 for Zoom!).

At the same time, some industries like energy, retail, and aviation, have been harshly impacted by the pandemic, which reduced the price of these products and services.

In a nutshell, if you had sunk all your investments in one of these industries, you'd probably end up with even less money, while whoever kept a varied portfolio turned out to have much better results.



2. Bring your expenses down

We agree... Probably not the most thrilling alternative, right? But it's crucial nonetheless. Nowadays, each pound needs an assignment.

Take a close look at your bills and try to cut what you don't need. You can even negotiate some of these, like phone and Internet bills or home or car insurance (or even rent!). You can also consider tracking your expenses through a budgeting app.

Despite this, there are some essentials you will have to have, like food. Regarding this, why not try meal planning? You can save a lot of money by doing this. One tip is to find recipes that use the same ingredients, as you'll be more likely to use up all your products, without wasting anything.

If you need some new furniture, Facebook Marketplace can be a good place to find items sold locally. 

Be proactive and find exactly where are you spending your money, so you can reduce your costs.



3. Increase your income

In the three months to July of 2022, the unemployment rate in the UK decreased to 3.6%, which is still below pre-pandemic levels. This means that  while it may not be easy to increase your income overnight, businesses are struggling to hire, so this could be your chance!

You can also consider negotiating for better pay. Use your job performance to go after it!

A third alternative is to make extra money outside of your job. Have you tried to sell things you don't use on eBay or Facebook Marketplace? Have a spare room at your house? Why not rent it? Give Airbnb a shot. Do you love animals? Then pet sitting could also be a good side job for you.



4. Invest in yourself

Examine the possibility of learning a new skill. Investing in yourself is one of the best ways to increase your purchasing power over time. 

While pursuing advanced degrees can be expensive, there are currently other cheaper ways of growing your knowledge and as a consequence making you an indispensable employee for your company.  



Bottom line

Although the Bank of England is projecting inflation to increase to 13% in the final quarter of this year, it's still difficult to tell if this spike in inflation is going to last and for how long. 

Either way, remember: the best way to fight rising inflation is to return to the basics. In other words, have a long-term investment plan, find out what you're spending your money on, consider ways to increase your income, and invest in new skills.



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Published by Elisa Ribeiro Soares
Elisa Ribeiro Soares