Inflation has been running at high levels recently, with various things pushing up the cost of living disproportionately. These ‘one off factors’, as they have been called by politicians and economists, don’t seem to be going anywhere quickly. The rate of inflation – currently around 5 percent, depending on how you calculate it – has been predicted to fall for months now, but unexpected issues have kept it high. Cash Genie offers some ideas for how to bring down your own personal inflation level.
Inflation is just a measure of how much your money is worth. If £100 buys you 100 loaves of bread in January 2010 but you need £105 to buy the same number in January 2011, then inflation is 5 percent. Five percent doesn’t look like much, but if you multiply that amount across all your spending for the year, it could end up equalling £1,000 or more for the average taxpayer. But it’s worth noticing that the inflation figures are one-size-fits-all numbers that don’t think about much of what goes on under the surface. There’s some difference between RPI and CPI indexes – one takes into account mortgage payments, the other doesn’t – but besides that they are pretty blunt instruments. Cash Genie argues that inflation is more complex and personal than this. After all, no two shopping lists for the month are the same, which means that a month-to-month comparison of how much more you are spending than the same month last year will be different for everyone.
So, think about your personal inflation figure and how you can bring that down. What are the areas of spending for you that have added extra expense? Fuel is one clear one for many people, since oil prices have been driven up by unrest in the Middle East. However, other categories like household equipment, cleaning products and furniture reduced the average. In other words, Cash Genie argues that to make the most impact on your spending, find the categories that have pushed it up the most. You will be able to save far more by economising on fuel/travel, alcoholic drinks and tobacco than on other areas. If you want to get the largest bang for your buck without cutting back on every single area (which isn’t much fun) then it’s worth being a little more careful about which things you try to economise on.
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Cash Genie is committed to responsible lending practices, and it’s a business principle that customers should not have to come back and use the short-term loan services repeatedly. Apart from anything else, it’s not good commercial sense, because encouraging unwise financial practices means that clients are more likely to default on their debts! So a part of the service is helping customers to organise their money in such a way that they won’t need to go for such loans in the future.
The best way to do this is to examine your spending: all of it. It sounds like a big deal, but it can make a great difference. Break it down if it seems scary. First, check all of your major outgoings: rent or mortgage, bills, utilities, phone, internet, interest on loans, council tax and so on. It may be that you can save money already by moving providers for one of these. In the case of a mortgage, that could save you hundreds of pounds or more a year. Others might mean you have an extra ten or twenty quid at the end of the month – still worthwhile.
But the most surprising examples are likely to come from the expenses you barely notice. These are the little, cumulative expenditures you build up over the week. When you look at them over the course of the month and year, they can make a huge difference. Picking up a coffee on the way to work every morning? That’s only £2 or so, right? But that’s £10 a week, £40 a month or getting on for £500 a year. That could represent an instalment on your mortgage or a month’s rent. Similarly, buying a sandwich and drink every day instead of making the same at home? Easy another £1,000 a year. The same goes for the odd night out: it’s very easy to lose track.
Cash Genie recommends keeping an eye on these ‘trivial’ expenses. It doesn’t mean you have to deny yourself totally – no one’s saying that you shouldn’t enjoy the odd treat or lunch out. What’s important is that you see what these are actually costing you. Once you know that, you can decide whether the convenience or treat is really worth it, if the end result is staying in debt (and therefore having to pay more through interest) in the end. In addition, if you’ve got debts you need to pay off, this can be a great motivator. If a couple of coffees a week fewer means peace of mind in the long term, then it’s no contest.
Please visit http://www.cashgenie.co.uk/ for further information about this topic.