Combatting inflation by careful financial planning

The upsurge in inflation over the last year or so has again vividly highlighted the devastating impact sharply rising price levels can wreak on people’s finances. Carefully reviewing your financial choices now, though, can ensure you continue making appropriate decisions that will help to stop inflation leaving a lasting impression on your financial future.

A lack of understanding

Official statistics show the headline rate of inflation peaked at a 41-year high of 11.1% last October but, although economists expect it to continue falling for the rest of this year, the rate has so far remained stubbornly high. Research¹, however, suggests the impact inflation has on our finances is not widely understood, with over half of UK adults failing to grasp how rising prices eat into the buying power of their savings.

Limiting the damage

Inheritance is another area where high inflation can have a profound effect. When combined with the continuing nil-rate threshold freeze, soaring prices inevitably mean more estates are likely to be dragged into the Inheritance Tax net. Careful planning now, though, can limit any future liability and preserve people’s ability to pass on assets to their heirs.

Pension pressures

Retirement provision is also a concern, with growing evidence that cost-of-living pressures are leading some to cut back contributions as a way to make ends meet, without realising the lasting damage such decisions can make. For instance, analysis² based on various assumptions (about such factors as salary, pension contribution rates and investment growth) shows that if someone opts out of pension contributions for five years in their 20s it could reduce their final retirement pot at age 66 by £114,000.

Stay on plan

At times like these, it is often worth revisiting what initially inspired you to set your financial goals. Reconnecting with those original motivations can encourage you to stick to your plans and thereby help maintain control over your financial destiny.

Here for you

As ever, we’re here at 75point3 to help; so please get in touch if you need to review your finances and, together, we’ll plan to mitigate inflation’s impact on your future financial wellbeing.

¹Aviva, 2022

²Standard Life, 2023

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. The Financial Conduct Authority (FCA) does not regulate Will writing, tax and trust advice and certain forms of estate planning.