Times like these can be really tough. It seems that every single day at the moment there is a new story in the news about how the cost of something is going up or how supply chains are being disrupted.
Already, there are reports of families who were previously only just making ends meet now having to make choices between ‘heating and eating’. These are scary times and it can seem a little hopeless.
In my conversations with clients in the Financial Planning business, it is clear that uncomfortable memories of the 1970’s are coming flooding back for people.
For those of you too young to remember (certainly any Millennial), back around 1975 inflation was increasing at a rapid rate and ended up topping out at around 24% and the Bank of England base rate topped out at 17% later that decade - can you imagine paying 17% interest on your mortgage!
Well, a lot of people can because they lived through it and those memories are starting to come back to the surface.
During times like this it can be really tempting to just give up. To think that things are hopeless. To think that you might as well not bother – but this approach will rarely deliver the results that you really want – quite the opposite in fact!
Panicking rarely achieves anything other than increasing your blood pressure! Taking action is what will get you through the storm.
So… what can you do to help combat the current bout of inflation and increasing interest rates. Well, here are 3 actions to consider taking right now:
Many people have been sitting on tracker or flexible mortgages for many years now and, for the past 14 years or so since the Great Financial Crisis, this has been a pretty sound strategy.
Interest rates all over the world have been at or pretty close to zero and so these tracker or flexible deals have also offered record-low interest rates.
The prospect of interest rates increasing has seemed very remote up until very recently, so there has not really been anything to worry about.
Now however, things are changing! And Fast!
Interest rates have already started to increase as central banks across the globe look to combat rising inflation.
As such, if you haven’t already – I think now is probably a really good time to lock into a long-term fixed rate mortgage deal. It seems very likely that interest rates will continue to climb and so now is probably a good time to lock a rate in before they go higher still.
It is still possible to get a 5 year or even a 10 year fixed rate mortgage at a rate of around 2.3% in the UK which is still excellent by most historical comparisons, however it is worth mentioning that the same 5 year deal in December was at 0.99% - so the rate on offer, although still competitive, has more than doubled in just over 3 months – that is how quickly things are moving!
In the UK, you can use a comparison site like Money Saving Expert to help you find competitive deals.
This is a good time to do a full root-and-branch review of all your regular bills and expenses.
First off, do you have anything that you actually don’t use at all?
Many of us have subscriptions that we either don’t use at all or use very rarely. Streaming services and gym memberships are favourites in the ‘unused subscriptions’ category, however given that everything seems to be on a subscription nowadays, you could add in coffee, online exercise classes, razors – anything really!
The key here is to look at things that you don’t actually use (or hardly use) in the first instance. I am stating the obvious here, but these should be cancelled yet it is amazing just how much money we waste on subscriptions that we actually don’t use.
This is Money repot that Brits waste a staggering £25 Billion a year on unused or unwanted subscriptions.
If you still need to make further savings, then things are going to get a little tougher. Now it is time to consider what you need and what you want.
If you have things coming out of your bank account each month, then you have to ask if they really are essential.
Even if they are, could they be trimmed or reduced in someway. Could you downgrade to a lower tier on Netflix for example (when was the last time you really had 4 devices streaming simultaneously?).
Other bills can be negotiated. Give your insurance and utilities suppliers a call and see if they can offer you a better deal.
Under normal circumstances, I recommend a side hustle for people who want to improve their lifestyle or increase their savings rate.
During times like these though, a side hustle might become a bit more of an essential.
A side hustle is a great way to help earn a little extra income. The good news is that there are a ton of side hustles that can be done very informally with little in the way of commitment. There are many options where you can dip in and out as you like.
At times like these, are hard as it can be, it pays to focus on the positive.
If you are reading this, chances are you living in a reasonably safe and developed country with some kind of social security or fallback system.
That will be little comfort for those who are struggling, but it pays to consider those in the world less fortunate than us.
The other thing to bear in mind is that this too will pass.
The world has been through things like this before and, although it may take some time, it will get better.
We will get through this and there will probably be lessons and unexpected benefits that come from it.
Keep your head up. Keep calm, carry on!