How much should I save each month? Is inflation really affecting my savings?

The cost of living has increased over time, and inflation is a major factor behind rising prices. As a result, it becomes harder to earn enough money to cover basic expenses. This means that saving money is becoming even more important.

Saving money is essential for building wealth. If you want to beat inflation, you'll need to start saving now. Here are some ways to get started.

Sort Out Your Savings

Before you can begin saving, you need to know how much you have in the bank. You can do this by checking your current account balance or by using an online banking service.

If you're not sure where your money is currently being held, you might be able to find out by contacting your bank. They may also be able to tell you if there's any interest being paid on your savings

To find out how much you can contribute to your savings each month, take into account what you already spend on things like rent and bills. Then add up all of your regular monthly spending and see if you can afford to put aside 10% of your income.

Creating a budget to track all of this can be easily done on a spreadsheet.

Invest Some of Your Savings

For those looking to diversify their investments, it’s important to consider what types of assets you want to invest in. While stocks are often considered the go-to investment option, they come with risks. Bonds offer stability, but they aren’t always the best choice for high returns. Real estate offers a unique combination of both risk and reward.

The key is finding something that fits your needs. If you’re looking for steady returns, you might choose to invest in a bond fund. If you want to take advantage of rising interest rates, you could look into REITs. And if you want exposure to the stock market, you could opt for a mutual fund. There are many options out there, so do your research and find one that works for you.

The main thing is having your money invested. If your money is just sitting within a regular savings account, then you won't benefit from the growth potential offered by investing; And you definitely won't be beating inflation.

Cut Down on Costs

In a study shared by Tom Conner (Drew Berry Insurance) "Close to 40% of UK households are just one paycheque from potential homelessness". This is why we need to try and increase our savings as much as possible.

You don't necessarily need to cut back on everything, but you should aim to reduce your spending wherever possible. For example, you could:

• Cut down on eating out at restaurants

• Switch to cheaper energy suppliers

• Look for better deals on utilities

• Consider moving somewhere cheaper

• Reduce your car insurance payments

• Find cheaper travel options

By doing these simple things, you can make a big difference to your finances.

If you're like most people, you probably spend too much. And chances are good that you've got some unused coupons sitting around somewhere. You could use those savings to pay off debt, put toward retirement or even donate to charity. But what do you do with all that leftover cash? Well, you can start by cutting out unnecessary expenses. Here are five ways to reduce your grocery bill without sacrificing quality.

Not Risking It Can Be Risking It

Investment decisions are often based on emotion rather than logic. If you're afraid to invest because you think you won't make money, then you're probably doing yourself a disservice. You might lose some short term gains, but over the long run you could end up losing much more.

Fixed return investments are not risk-free, but they do provide a steady stream of income. When investing, consider whether there are better options out there. Some fixed return investments are actually very risky, while others aren't.

Don't let fear control your investment strategy. Analyse your situation and decide what will work best for you before jumping into anything. Having your money sitting in cash will just allow it to rot away due to inflation .

When you have enough saved up, you'll feel comfortable putting it towards an investment. That's when you'll see real results.

Avoid Keeping All of Your Wealth In Cash

Cash is great for emergencies, but it doesn't offer any kind of return. It's also easy to keep track of, which makes it ideal for tax purposes. However, it does nothing for your portfolio.

While your cash is just sitting in a savings account earning no interest, your money is actually losing value to inflation. Now it's always a good idea to have some cash handy in what people often refer to as an emergency fund or rainy day fund.

These funds are usually intended to cover 3-6 months of living expense so that in the event of a financial crisis, you still have some money left over. While this may seem excessive, it's important to remember that if you were to lose your job or get sick, you'd want to be able to live comfortably until you found another one.

The problem is that once you have a large amount of cash sitting around, it becomes difficult to know where to invest it. The solution is to diversify your holdings. This means having a mix of stocks, bonds, mutual funds and other types of investments.

Purchasing assets such as index funds already give you this sort of diversification as index funds essentially act as a basked full of other stocks. So when you purchase index fund, it's the same as purchasing a little bit of all of the companies within the index fund.

Research Past Inflation Trends

Although history doesn't repeat itself, there are often very similar trends and patterns that occur. Looking through historic events similar to today can help give loose indications of what may be occurring in the mid to long term.

Doing this research and having this knowledge not only helps with inflation but also any other asset class available. Many asset classes tend to go through cycles and patterns which can help with future decision making.

Summary

Inflation is something that many investors don't like to talk about, but it's an unavoidable part of life. As long as you understand how inflation works, you can use it to your advantage. By understanding how inflation affects your money, you can take steps to protect yourself from its effects. By protecting yourself against inflation, you can ensure that your money grows instead of shrinking.

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Thanks for reading 😀

FAQ

How to Deal with Rising Inflation?

The best way to combat rising inflation is to return to the basics: Know what you're spending your money on, have a long-term investment plan and consider ways to increase your income.

Source: time.com

What Is Inflation And How To Beat It? – Forbes Advisor INDIA

Simply put, inflation is the increasing cost of everything around you with the gradual decline in the value of your money. To understand this further, consider the cost of any staple in your home that you have been buying over the past few years and think about how that cost has increased over the years.

Source: forbes.com

What does inflation mean for you?

It's important to know the inflation rate when you're thinking about savings and investments, since it makes a big difference to whether you make a profit in real terms (after inflation).

Source: moneyhelper.org.uk