The Times - UK (2022-06-11)

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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your finances

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