There is little doubt that the sudden and sharp rise in the cost of living has been a shock to many people across Ireland. Its impact on our personal finances is evident at the checkout when we pay for food, on forecourts when we pay for fuel and when we get an energy bill.
Inflation hits us all in two ways. First, when the cost of goods rise, we pay more – that’s hardly a mystery to most people. But there is another side to inflation that is equally damaging - over the long-term, it erodes the purchasing power of money.
So, in the short term, it means that we need to spend more money to buy the same basket of groceries. But, over the long term, it means that the calculations and assumptions we may have used to save and invest for future events, including retirement, may no longer be fully accurate.
So, while there is little you can do to change the rate of inflation, there are steps you can take that will help you take back control. For example:
- Work out your personal budget by using a budgeting sheet, as it forces you to examine costs in detail. Once you have a clear overview of your finances, the 50/30/20 budgeting rule is a great way to ensure the best use of your money.
- For food and fuel, you might consider changing what you can. For example, it is estimated that food waste in Ireland costs each household about €700 a year. This may be one area where some small changes may result in savings. Check out www.mywaste.ie to learn more.
- When it comes to energy costs, this might be an opportunity to examine how energy efficient your home is. You can review energy saving tips at www.seai.ie.
- With more and more people ‘returning to the office’, bike-to-work and tax-saver schemes, if available, offer a tax-efficient means to reduce costs - see more detail at www.citizensinformation.ie and www.revenue.ie and visit our tax benefit finder here.
- Review the calculations and assumptions you may have used to save and invest for future events, including retirement, and what the impact of inflation is on your investment strategy.
- If you have extra money or savings, you may want to consider making investments that may earn you better returns than inflation. To decide which investment options best fit your finances and risk profile, speak with a financial advisor. Above all, take action, now, to beat inflation to protect your current purchasing power and your ability to save for a more stable and worry-free future.
At Bank of Ireland, our financial wellbeing initiatives include a broad range of tools and supports. Our library of content has been developed to enable users to learn how to build financial resilience for key life events, including inflation, and how to protect their financial wellbeing. For more information visit Financial Wellbeing - Bank of Ireland