Throughout our lives, there will be factors that have an impact on our finances, whether that’s unemployment, a low-paid job, or the state of the economy. Inflation is having a huge impact on many of us this year, as prices rise – dragging us into a cost-of-living crisis. This means we have to stretch our money further to meet basic needs. Because of this, more of us will end up in debt and find it difficult to cope, especially if we’re faced with an unprecedented expense. This is where a payday loan direct lender UK can help. If you need cash quickly to help you pay for an emergency, there is a range of loans to choose from to suit you. Read on as we take a closer look at inflation and how you can deal with it.
What is inflation?
Many of us all over the world are facing some of the highest inflation rates in years – but how much do you know about it? When we talk about inflation, we’re talking about the rate of increase in prices, over a certain period. And there are a few reasons why inflation might take place, for example, stresses on the supply chain due to the impact of the pandemic means that prices are increasing as demand rises. This can then have a knock-on effect on those that are on lower incomes, as they will have to rein in their spending. Because more of us are worried about spending our money due to the increasing cost of living, the economy has slowed. A slow economy puts businesses and jobs at risk. Generally, inflation has a negative impact on our finances in more ways than one – but there are ways that you can deal with it…
How can you deal with it?
The fallout from the pandemic has made it difficult for many economies around the world to thrive – which then causes issues not only to the health of a country’s economy but to our personal finances too. Inflation means higher fuel costs, rising energy prices, and even an increase in the amount you’ll be spending on your weekly shop. So, what can you do to manage it?
Make a budget
This is one of the best ways to get an overview of how much you’re spending each month. Look at your household income and subtract the amount you pay in primary expenses – energy bills, food shopping, and mortgage payments. The money you have left is the amount you have for secondary expenses. If you don’t have much to work with after your bills have been subtracted, or your income doesn’t quite cover your monthly costs, you can identify where you can make changes, which brings us to our next point.
Reduce your expenses
When it comes to managing inflation so that you can make your money go further, reducing your spending is key. Of course, you won’t be able to do this with your primary expenses but identifying if you’re spending too much in other areas means that you can cut back and save. For example, if you’re looking through your outgoings and your mobile phone bill is expensive, but you don’t use some of the features you’ve signed up for, get in contact with your provider to ask if there’s a better plan suited to your needs that may be cheaper. That will allow you to make an instant monthly savings. Remember to cancel any memberships you don’t use to free up extra cash flow.
Pay off your debt
This might seem counterintuitive in times of inflation – this just means more money going out of your account. But that’s not necessarily true. Yes, in the short term, if you focus on paying off your debts, you will be spending more on these payments, however, the sooner they’re paid off, the sooner you will be debt free – which will free up a huge portion of your cash flow! If you’re paying off debt, a large portion of your monthly income will be taken up by this. Imagine how much further your money could go if you were free of outstanding payments! Keep up to date with how much debt you have to pay off and come up with a plan in line with your budget to decide how much money you could pay off each month. The more you pay, the faster the debt is gone, and your cash flow can benefit.
Save when you can
It can be hard to save when prices have gone up, and you’re spending more money on primary expenses each month – but you should make sure that you’re trying to save a little each month when you can. It doesn’t have to be a huge amount but transferring money into your savings account means you can pay for any unprecedented expenses you may be faced with more easily. Stretching your income during times of inflation is hard enough but add an unexpected expense into the mix and your cash flow might not be able to cover it. Having an emergency fund is something that is essential when it comes to improving the way we manage our finances, and could be the difference between staying afloat, and falling into financial difficulty.