Guest post by Lewis Humphries
While there was a brief respite for inflation in August, it increased once again in September while returning to July’s 40-year high of 10.1%.
To make matters worse, the governing Conservative Party has been unable to effectively deal with the underlying causes of inflation or introduce viable countermeasures, due to consistent in-fighting and continual changes in leadership.
This has left vulnerable homeowners and tenants, particularly at risk, but there are measures that you can take to save money if you belong to the latter demographic. We’ll explore these below, but first, let’s take a closer look at the economic challenges facing tenants in 2022.
What is the Impact of Inflation on British Savings?
If you’re a tenant, the chances are that you’ll want to own your property at some point in the future.
However, the average price of a UK house peaked at £292,000 in July 2022, and while the housing market could be about to depreciate in the current economic climate, it’s unlikely that properties will become markedly more affordable anytime soon.
The issue here is that inflation describes the rising cost of everyday goods such as food and fuel, creating a scenario where the value of the pound in your pocket depreciates over time.
Naturally, this also erodes the value of your cash savings, both in terms of the amount that you can set aside each month and the purchasing power of your savings as they mature and accumulate over time.
Sure, it can be argued that hikes in the base interest rate (which are used to counter rising inflation and reduce the incentive to spend) will help to gradually cap the cost of living, while also improving the interest rates offered on individual savings products.
However, such measures only have an incremental impact, while they’re not designed to cope with rampant inflation at such an exalted level.
How to Reduce the Impact of Inflation and Save Money
The question that remains, of course, is how can you reduce the impact of inflation and save money as a tenant. Here are some ideas to keep in mind:
#1. Understand the Impact of Inflation on Earnings: Of course, rising inflation also devalues your monthly earnings, while it should also be noted that the cost of living continues to rise at a disproportionate rate to wages in the UK. Because of this, you need to factor realistic salary expectations into your financial planning and budgets, while helping you to reduce spending where possible and increase the amount you can commit to spending over time.
#2. Invest in Tenants’ Insurance: While tenants’ or renters’ insurance may require a nominal monthly payout, this can potentially save you huge sums of money over time. With renters’ insurance, you can protect the material possessions that you own within a rented property, ensuring that their value can be recouped in the event of theft or accidental damage. This type of long-term saving can prove key in the instance where you typically have less disposable income to deal with.
#3. Prioritise and Organise Your Debt: In reality, you should only really strive to save money in instances where you’ve been able to successfully manage your debt over time. Otherwise, individual debts can incur interest arrears and mount beyond your control, so it’s important to organise your debts by tackling them head-on and prioritising them strategically. The same principle applies to monthly bills, as these need to be prioritised and settled at a time to prevent debt from mounting.