Ways to reduce the impact of inflation on your finances
Updated: Apr 8
Inflation is the silent killer when it comes to things that deal a blow to your finances. And right now, inflation is skyrocketing at levels not seen for decades.
So once you understand how inflation impacts your money, you can look at how you can reduce that impact.
Let’s firstly explain, in simple terms, what inflation is.
Inflation measures how much the price of the things we buy increases every year.
It’s measured as a percentage, and you’ve probably heard about it in the news. Inflation figures are released every month.
Here’s a made-up example to explain the impact of inflation on your money:
A year ago, I went to the supermarket and spent £100 on my food shop.
Today, inflation is 1%. That means that the price of stuff has increased by 1% since this time last year.
I go to the supermarket and I buy exactly the same stuff – the same amount, the same products, same brands etc.
That food shop now costs £101 – because inflation is at 1%, so 1% of £100 = £1.
Inflation silently punishes you for doing nothing
So if you’re looking to save money, before you’ve even thought about cutting your spending, the prices of things you currently buy are already going up!
Tips to reduce the impact of inflation on the things you buy
Firstly, inflation is never the same for everybody. We all have a personal rate of inflation depending on our lifestyles. So it’s important to be aware of the key things you’re spending your money on.
1. Look at where you can be flexible on what you buy at the supermarket
There will inevitably be things you simply have to buy to live. But there will be things you can be flexible with. And I believe even the savviest of shoppers can reduce their food shop bill.
Over the last few months, I’ve ditched a branded bottle of fizzy pop which was costing me £2-3 a week based on the amount I was buying.
I switched it for a non-branded equivalent for 40p. Now that may not seem a big saving, but over a year that amounts to £50-£60 saved, just by switching to a cheaper product.
And that saving can mitigate the effect of rising prices for other things you buy at the supermarket.
So next time you’re doing a shopping list, ask yourself which things you could find a cheaper version of. Reducing a food shop bill starts by just giving things a try.
Follow my 2 rules on promotional offers
1) Go easy on offers on treats and snacks
Supermarkets love getting customers to buy extra stuff with promotional offers.
Buy one get one free and 50% off are the common ones. These offers are common on things like snacks and treats.
If you were planning on buying something anyway, it could be a good deal. But be careful you don’t just buy extra stuff because it sounds like a good deal and then end up eating it twice as quick.
Ever bought a packet of biscuits for half price and wondered where the packet went by the next day? It really won’t help you spend less.
2) Store cupboard basics can be good value
That said, promotional deals on non-perishable items – your store cupboard basics or cleaning products – can be worth stocking up on. You’re unlikely to use up those two bottles of bleach twice as quick because they taste so good!
2. Subscriptions are designed to go unnoticed – but getting them under control is easy
We love a subscription. And you can get a subscription for just about anything these days.
The beauty of subscriptions, for the business owners, is that they’re very passive
You set up a direct debit for a not-so-large amount of money, and let it go out of your bank every month without doing anything.
Now I’m not saying there’s anything wrong with having subscriptions if you get the value from them and need them. But we run the risk of subscribing to lots of things and failing to acknowledge if we genuinely use them or need them.
Streaming services are a great example of where costs can stack up.
I used to have Netflix, Amazon and Disney+. On the face of it, these streaming services don’t cost the earth. £7-£10 a month. But when you’ve got a few of them, the monthly costs really stack up.
Streaming services are notorious for raising their prices, higher than inflation, each year.
Did I really need 3 streaming service subscriptions each month?
Well I decided to turn one of them off and just see how I felt.
The beauty of subscriptions, for the customer, is that you can generally cancel anytime.
That gives you complete control of them. You decide when you’ve had enough.
I decided that there wasn’t much on Disney+ to keep me entertained. So I cancelled my subscription. Based on the fact I had 3 streaming service subscriptions all roughly the same price, I basically saved 1/3 on my subscriptions by just ‘pausing’ one of them.
Notice how I said ‘pause’. With subscriptions, FOMO is very real. Our brains don’t like the idea of no longer getting something. Which is why we often say, ‘oh I’ll cancel it soon’, then never get round to it.
So don’t think of it as cancelling. Just think of it as taking a break.
Again, like the supermarket switches, you’ve got to start by giving it a go.
3. Get organised with contract end dates on your bills
Again, this is really about failing to do nothing.
Every time you start a new contract – energy, broadband, mobile phone, etc – make a note of the contract end with a reminder to start shopping around 3-4 weeks before that end date.
It sounds boring and so far ahead. But do it straight away. It will barely take a couple of minutes.
Companies do have greater responsibilities to tell you your contract is ending, but don’t rely on them making it super clear.
Prices generally go up after a contract, so don’t wait until the contract ends before shopping around. You might get lumbered with a more expensive bill, if only for a month.
Bills for these sorts of services also tend to increase, higher than inflation, every year. So a new deal is often just getting you back to where you were the previous year – not necessarily saving you real money.
4. Shop out of season when buying clothes
If you spend a large amount of your money on clothing, inflation will impact your finances.
My very simple top tip for reducing clothing prices is to buy out of season.
It feels a bit odd to begin with but can bring in big savings.
Summer clothing in autumn, winter clothing in spring…the trends really don’t change that much so buying last season ready for next year really won’t be much difference.
Winter jackets and other bulky items can be really cheap when it starts getting warmer and shops have stock left to shift.
Another handy tip is to double up on clothing when you’ve found something you love for a bargain.
I like to do this with trainers. Last year I bought two of the same pair as they were really comfy and on sale. I still have the second pair box-fresh in my wardrobe so won’t need trainers for a long time.
5. Don’t waste time and energy on things that are fixed in price
We all have to be realistic that some things just go up in price and we can’t change that. So don’t waste time and energy trying to cut costs on everything, because you won’t be able to.
The most common thing is council tax
It goes up every year, usually higher than inflation. And there is lots of content around ‘how to reduce your council tax’. But for most of us, it’s a bill we have to pay and has a fixed cost.*
*If you're a single person and you're not claiming 25% single person's discount, please make sure you apply for this discount.
6. ALWAYS check if you can get cashback for a purchase
Cashback is like magic. I still don’t know why it exists but I love to take advantage of it.
If you’re struggling to save money on something, cashback can be a useful way of getting some money back. And as cashback offers are usually between 1-5%, this can reduce the impact of inflation.
Your main cashback websites are Quidco and Topcashback. But check out my tips on cashback stacking to see if you can double, or even treble your cashback.
When it comes to inflation, don’t let it get ahead of you. When you’re looking at your spending, it’s good to assume that by next year, whatever you’re buying now will cost an extra 2-3%.
So take a look at where you think you can make some small savings here and there to reduce the impact of inflation on your finances.
Small savings can make a big difference. Unfortunately, small increases can also make a big difference. Make sure that difference is positive for you.