With inflation devaluing our spending money, most of us are keeping an eye on our finances. Here are four ways to get the most out of your money:
Find a better savings account
Your old savings account may not be quite as generous as it used to be following the effects of inflation. If your savings account interest rate isn’t quite cutting it anymore, it’s time to look for a new one.
It is said that if you are in on a basic tax bracket, that you should look for a savings account which pays interest of 5% or more. If you are in the higher bracket, you’ll need a savings account that pays around 6.67%.
These aren’t as plentiful as they once were, but a quick savings account comparison will find around 30 decent examples.
As the end of the tax year looms and 2011/2012 tax changes become imminent, there an is escalating rush to get your allowance-worth in before April.
ISAs offer some of the most competitive interest rates on the market and, with tax-free interest to be made, many are choosing this route to invest their hard-earned cash.
2. Buy your home
If you are lucky enough to be in a position to buy your home, now’s as good a time as any. As inflation fluctuates, non-current or fixed assets are likely to gain value over time regardless. By buying your home, you can gain some financial security in a long-term investment.
With mortgage lending notoriously difficult to negotiate, there are still some deals available on the market. Fixed rate mortgage interest rates are increasing rapidly as customers rush to benefit from low interest rates, but tracker interest rates have fallen to their lowest rates since 1998, and may be a useful alternative.
3. Change your debt accordingly
Any fixed-rate debt during inflation is likely to be hedged your favour during inflation – growing interest rates won’t affect you and the amount you owe is worth less than it once was.
However, instead of ignoring your debt, now’s a good time to get it under control.
Debt that is not well managed can seep money out of your pocket unnecessarily. If you are in debt, figure out how much you owe, who you owe it to and how much interest is being accrued per month.
For more information, read our guide to dealing with debt.
4. Spend less
It seems obvious, but many of us haven’t adjusted to the decreased value of our pound. We have less spending power than before, which means we’ll have to spend less to balance out the difference.