The Times - UK (2022-06-11)

(Antfer) #1
6 Saturday June 11 2022
the times

Navigating the cost of
living crisis

to beat inflation and diversify your
investment portfolio. House prices have
tended to rise well above the rate of
inflation in the past — they rose 9.8 per
cent in the year to March, according to
the Office for National Statistics. By
purchasing property as a buy-to-let
investment, you could get rent as a
regular source of income, and landlords
may be able to raise rents in line with or
above the rate of inflation.
However, there are costs attached,
including stamp duty, capital gains tax
(on sales of buy-to-let homes) and
income tax on rental income and
renovation expenses.

Review your spending
While budgeting won’t make the cost of
essentials go down, it can make higher
prices easier to manage. Write down
how much money is coming in and
everything you are spending, then look
at where you can cut back. Cancel
unused subscriptions with the company
directly, through your banking app or in
the subscription settings on your phone.

Lower your household bills
In April there was a 54 per cent increase
in the energy price cap that limits how
much energy companies can charge
customers on default tariffs. It means the
bill for a typical household on that tariff
will rise £693 over a year. Switching to
paperless billing, turning down your
thermostat and installing insulation can
help to keep costs down. If you usually
wash your clothes on a super-hot cycle,
change the temperature to 30C to save
electricity. When it’s time to buy or
replace an appliance, look for a high
energy-efficiency rating. For more
energy-saving tips, see page 4.

Get money off childcare
Almost 800,000 eligible families are not
taking advantage of the government’s
tax-free childcare scheme.
Parents get £2 for every £8 they spend
on childcare up to £2,000 per child each
year. This can be used to help pay for a
childminder, nanny, nursery, wraparound
care or even some holiday clubs.

Cut the cost of your grocery shop
Tonnes of unused food is thrown out
every week. People often misjudge how
much they need or are tempted by offers,
which means spending more than
necessary. Cut what you spend by:
6 Making a list of what’s in the cupboard
and committing to using up ingredients.
6 Going to the supermarket with a list
and sticking to it.
6 Buying individual ingredients such as
loose carrots, rather than a whole bag if
you don’t need it.
6 Using apps such as Too Good to Go
or Olio to get local food for free or at
a hefty discount.

without losing customers. This is called
“pricing power”. Companies that have
this often command brand loyalty, such
as those that specialise in luxury goods
like LVMH, the owner of Louis Vuitton,
or big names such as the tech giant
Apple and the sportswear maker Nike.
Firms that deliver essential products or
services, such as healthcare, like the drug
maker Pfizer, also find it easier to
increase prices without affecting sales.
There are also investments designed to
keep up with inflation. Inflation-linked
bonds are loans to governments or
companies that pay interest that rises
with inflation. Check the measure of
inflation it tracks (RPI, the retail prices
index, tends to be highest), or your
returns may be lower than you expect.

Fix your mortgage
The Bank of England has raised the base
rate four times since December, from
0.1 per cent to 1 per cent and further
increases may be coming. Lenders pass
these increases on to customers by
raising rates of interest on mortgages.
If you are one of the two million
people who have a tracker or variable-
rate mortgage, or your fixed-rate deal is
coming to an end, now may be the time
to consider switching to a new fixed-rate
mortgage, which won’t leave you at the
mercy of further base rate hikes.
A fixed-rate mortgage has a set
interest rate for two, three, five or ten

Shield your cash from inflation


Annabelle Williams and


Elizabeth Anderson work


out how to beat rising


prices, from investing to


locking-in the mortgage


years, so your repayments will be the
same every month for that period.
Mortgage rates are changing quickly but
those who have a deposit or equity in
their home of at least 40 per cent can get
a two or five-year fix with an interest
rate of about 2.5 per cent. With a deposit
or equity of 15 per cent you could get a
two-year fix of about 2.5 per cent and
about 2.6 per cent for a five-year fix.

Earn cashback
Websites such as TopCashback and
Quidco give you money back when you
shop at certain retailers through their
site. For example you can earn 5 per cent
cashback when you buy a Samsung
phone, tablet or computer with Quidco,
and 15 per cent when you shop at Marks
& Spencer with Topcashback. You can
earn more by referring someone else:
Quidco gives you £25 once the person
you refer earns £5 cashback and
TopCashback will give you £30 once
they earn £10.
The free American Express Platinum
Cashback Everyday credit card pays
5 per cent cashback on purchases up to
£100 for the first three months, then
0.5 per cent after that on spending up to
£10,000, rising to 1 per cent on spending
over that amount.
Chase pays 1 per cent cashback for the
first 12 months on purchases made with
its debit card.

Sign up to rewards schemes
If you frequently shop at one retailer or
supermarket, check if it has a rewards
scheme. The free M&S Bank Rewards
credit card earns you four points for
every £1 spent at M&S for the first year
(dropping to three points per £1 after
that) and one point for every £5 spent
elsewhere. Each point is worth 1p in
Marks & Spencer vouchers.
There are deals to be found in other
supermarkets’ loyalty schemes. With the
Tesco Clubcard you can get a sandwich
meal deal for £3 rather than £3.50; at
Sainsbury’s you can get personalised
offers on products you buy regularly if
you are a Nectar card holder.

Buy property
Investing in property can be a good way

The price of Freddos is
rising, but digital banks
and loyalty schemes are
two ways to safeguard
spending power

63%


of Times readers


said they were


worried about


rising food costs


I


nflation reduces the buying power
of your money, meaning you’ll get
less for every pound spent. A popular
way to observe inflation is with the
price of a Cadbury Freddo. The small
frog-shaped chocolate bar cost 10p in
1999, but today it costs 25p. If you had
£10 in 1999 you could have bought 100
Freddos; now it would buy 40.
Inflation is at a 40-year high, driven by
fuel, energy and food prices. But there
are ways to protect your money.

Check your savings
Everyone needs cash set aside for
emergencies. It is recommended to have
at least six months of essential outgoings
easily available. But when inflation is
rising savings lose spending power unless
they earn interest.
Some of the newer online-only and
app-based banks offer interest rates
higher than high-street competitors’.
Moving your savings to the best-paying
account is a good way to shield your
money from some of the effects of
inflation. The highest rate on an easy-
access savings account is 1.56 per cent
from Virgin Money, followed by 1.5 per
cent from app-only bank Chase.
Inflation in the year to April was 9 per
cent and is expected to remain high, so
these interest rates will not fully protect
your cash from losing value, but as a
place to store emergency savings they
are the best you can get.
If you have any savings on top of an
emergency fund, you could lock them up
for a fixed period for a better rate. The
best rate on a one-year fix is 2.57 per
cent from Cynergy Bank and the best
two-year fix is 2.87 per cent, from Raisin.
It could make sense to use extra
savings to pay off a loan or mortgage
instead, if the interest rate on the loan is
higher than on the best savings account.

Invest
Investing in the stock market can be a
way of beating inflation. However,
investing in assets such as shares comes
with the risk that you could lose some or
all of your money. If you want to reduce
the risk, avoid being too exposed to a
small number of assets or sectors. A
good way to diversify is by buying into
investment funds. Funds can invest in
various assets, so can spread your money
across bonds, property and shares in
different sectors.
If you like the idea of investing in
individual companies, the best stocks to
choose during times of high inflation are
businesses that can increase the price of
their products to cover higher costs

COUNTING THE COST

April
2021

April
2022 Increase
First-class
stamps

85p 95p 11.8%

Annual
water bill
(average)

£408 £419 2.7%

Pint of
milk

55p 58p 5.2%

Annual
energy
bill

£903.45
(cheapest
rate)

£1,971
(price
cap)

118%

Annual
council
tax

£1,881 £1,966 4.3%

Loaf of
bread

£1.09 £1.14 4.6%

SOURCE: MONEY.CO.UK; ONS

FROM TIMES MONEY MENTOR READER PANEL RESEARCH

‘Cashback saves


me £180 a year’


need. I wait to see if the price
comes down or if a discount
or cashback deal
becomes available.
Sometimes I’ll wait up
to six months to try
to get money off.”
Arrowsmith visits
all the big
supermarkets to
compare prices and
take advantage of
last-minute reductions.
Arrowsmith, who lives in
Islington, north London, said
her local Tesco reduces prices at
8am, but at Marks & Spencer and

Waitrose it’s 6pm and 7pm.
“I tend to pick my
shopping times to
coincide with when
supermarkets start
reducing items on
the verge of going
past their sell-by
dates,” she said.
“Most products can
be used a day or two
after the sell-by dates.
Use your freezer to
store the food so that you
can take advantage of price
reductions but don’t have to eat it
straight away.”

P


olly Arrowsmith, 55, a
marketing director from
London, earned £178 through a
cashback website last year. She
always checks whether she can get
cashback before buying something
online, and does all her Christmas
shopping in the Black Friday sales.
“I do like to treat myself, but I’ll
never buy anything straight away
unless it’s something I urgently

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Money Mentor
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