Why now is the time to get your finances in order to offset inflation

Reworking your budget or cashflow plan and finding ways to save money can help you feel more in control as the cost of living continues to rise

Over the shoulder view of young Asian mother and daughter checking savings on smartphone via online banking. Saving plan for education. Child Trust Fund concept. Getty Images
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Are you feeling a financial pinch at the moment? Is the negative and foreboding financial news making you anxious? If so, you are not alone.

It feels as though inflation around the world is rising by the day.

In the UK, inflation has hit 9.1 per cent, up from 2.1 per cent in May 2021, according to the Office for National Statistics.

Meanwhile, US inflation surged to a 40-year high of 8.6 per cent earlier this month.

The inflation reports show that the areas most affected include groceries and fuel. As two of the more volatile categories, they not only affect inflation but also the hip pocket of average consumers.

In the US, it was reported that energy costs rose 34.6 per cent in one year while groceries increased 11.9 per cent in the same period. Other than housing, these tend to be the two largest costs I see in my client's budgets.

So, what do you do when two of the largest categories of your budget are increasing so dramatically?

Let’s put it in perspective. As individual consumers, there is little we can do to control what is happening to the economy.

However, we can control how we react to it, which means that now is an important time and opportunity to focus on your cashflow plan or budget.

It is also time to figure out or revisit your values, ambitions and goals. The next step is to then build a cashflow plan in line with those values, ambitions and goals to ensure you allocate your resources to the parts of life that are most important to you.

This does not guarantee there will be enough money to do everything that you want to do, but it will help to ensure that you are making the best use of what you do have.

This is powerful knowledge that you can use in many areas of your life.

Facing the reality of your finances may also motivate you to bridge the gap by asking for that pay rise you have been putting off, looking for a new, higher-paying job or setting up a side business that you not only love but one that will bring in extra income to help you do all the things that you want to do.

When reviewing your budget or cashflow plan, it is important to look for areas where you can reduce your costs, especially in the grocery and energy categories.

Why is everything so expensive right now?

Why is everything so expensive right now?

You can save money by shopping in cheaper supermarkets, for instance. It also helps to have a shopping list prepared to avoid unnecessary purchases, while shopping online and using delivery apps can also save you money.

Limiting your driving is not only good for the environment but will also help to reduce the cost of running a car, while using electricity-hungry appliances, such as washing machines and dish washers, during certain times of the day when the charge per unit is less can lower your energy bill.

Be creative and involve the family. My children love it when we set a family challenge! Be positive about it and make it fun.

If you are doing well financially and can comfortably absorb the inflation increases, this is a timely trigger to assess if you would be ready if your fortunes changed
Carol Glynn, founder of Conscious Finance Coaching

On the flip side, if you are doing well financially and can comfortably absorb the inflation increases, this is a timely trigger to assess if you would be ready if your fortunes changed, such as losing your job or facing a large, unexpected bill.

Do you have an emergency fund in place? Are you making the most of your income? If your savings are not invested, now is a great time to start.

But remember: fretting about the doom, gloom and fear we are hearing in the news will only increase our stress levels rather than our finances.

Instead, allow the noise to be your motivation for positive change and take charge of what you can control by focusing positive energy on your income and cashflow plans.

Carol Glynn is the founder of Conscious Finance Coaching

Updated: July 01, 2022, 4:00 AM