The rising inflation rate has raised concerns among policymakers and investors. The current rate of inflation in the UK, as of September, sits at 10% with many predicting it to reach 18% by early 2023. Consequently, the looming worry is the possibility of a recession. Inflation will continue for a little while longer before becoming better, but it always helps to prepare your money and finances for a higher cost of living.
For rising inflation, our advisers recommend that you:
- Set goals
- Invest
- Have back-ups
- Get professional advice
Inflation forecasts
The start of the inflation problem is credited to the fact that the preceding year saw low rates due to the pandemic. And when economies opened up, it took some time for the supply side to catch up with demand; the shortage pushed inflation upwards. Since then, the global situation has been worrying with the Ukraine conflict and heat waves across Europe leading to a rise in energy prices.
While the European Commission had revised its estimates from 6.1% to 7.6%, predictions say that the rate will drop towards the end of 2023.
Safeguarding your financial future
When savings and investments take a hit due to rising inflation, it is time to re-evaluate your finances. Here are a few things that our advisers have recommended you can do to plan for inflation:
A. Setting goals
Even though inflation may be worrying, panicking about it will not help. If you had financial plans and goals before these economic changes, now is the time to review them.
- Are they still feasible and realistic?
- Will they cushion you in the long term?
- If yes, then you are likely on the right track.
- If not, you can consider planning a different strategy that works around these events and inflation rates. We will always recommend speaking with an adviser before changing any financial plans.
B. Investing
You may already have some investments set in place. Inflation may squeeze your ability to save and invest, but regularly putting away some money in an investment avenue that yields returns is helpful and a great way to hedge inflation. Generally, safe assets are a good solution. The golden rule of thumb with investing is to diversify. Having a diversified investment portfolio with stocks and property is a great way to beat inflation. As you plan for your goals, watch out for options that are aligned with your future needs, fall within your risk appetite, and generate returns. At this time, some stocks may also be undervalued. If you get in at the right time, you can benefit from them later down the road.
You can try timing the market all you want, but time spent in the market will almost always work better.
c. Back-ups
Consistency in returns is often difficult to achieve. When influenced by uncontrollable world events, some form of backup can protect your finances. As with diversifying your investments, you could consider high-yield assets as well as relatively stable, safe ones. Government bonds and gold or silver are usually among the safer options.
It is also important that in times of volatility, you have an emergency fund. Our advisers recommend having 3-6 months of salary saved.
d. Get professional advice
It may be challenging for you to manage all aspects of your wealth, especially when inflation is a factor to consider. Financial advisers can help mitigate this management pressure. Because they have the information and expertise in this field, they can help you tailor your money towards your goals. You may also discover other options and plans that you had not previously considered. Overall, getting professional advice is for you to plan ahead and ensure that your financial needs are met.
Overall
Economies see ups and downs as times change. Preparing for the bad is always helpful, but know that it is bound to get better. Inflation is rising right now, but estimates predict recovery and upturn by later next year. Hoxton Capital Management can help you plan for the current inflation and expected recovery to ensure that you get the most out of your money. With customised guidance, you can make the most of our transparent services.
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