If you’re keeping up with the potential challenges you’ll face this year with your finances, then you’re well aware that rising inflation is very much a cause for concern. Here are some questions to ask yourself to help protect your money from inflation.
This does not constitute advice and advice should be sought in all instances before acting on it.
For those with savings and investments, rising inflation means your money essentially loses its real value over time, which creates quite the negative impact. Inflation’s affect on the real value of an investor’s portfolio should not only be a short-term concern, but a long-term one as well.
No matter where you are in life, it’s important to consider how much inflation will affect you and your investments. Here are some considerations…
How much cash do you really need to have available?
While the bulk of your money should be allocated to investments, you should have some tucked away in a savings vehicle for short-term growth, but still available should you need it. Exactly how much cash you need will be entirely dependent on your personal circumstances and savings goals.
You should have enough emergency funds to cover anything unexpected that may come up. If you don’t have any kind of wealth protection in place, that number will be quite high, but even with protection, a small amount of cash savings equal to about three months income is prudent.
How much should you be investing?
Of course, the exact amount and avenues you pursue for investments will be based on your individual situation and what goals you want to achieve, but it’s wise to build an investment portfolio.
A diversified investment portfolio (which will include cash savings too) minimises risk and ensures that even if one area of your portfolio underperforms, your other investments will make up for the gap.
If you’re saving for a long-term goal, like retirement, then factoring in inflation is essential because if you don’t then the value of your money could deteriorate and your future plans might need to be adjusted to accommodate.
Are you making the most of your allowances?
Have you made the most of your ISA and income allowances? Ensuring you’ve maximised your tax-free saving vehicles is crucial. That’s £20,000 each year you can save into various ISA types, all without worrying about tax. Your money will grow whether you’ve invested in cash or other asset classes like stocks and shares, and the long-term effects of this tax-efficient growth can be significant.
Personal income allowances also allow you to minimise your tax burden as well and anything that will let you keep more of your money will help in the battle against inflation.
If you have a spouse, don’t forget to see if you can use their lower Income Tax rate or even their Personal Savings Allowance by holding investments in the name of whoever is the higher earner. The best part is there is no limit on the amount of money that can be transferred between spouses, so transferring holdings to or from your partner could potentially greatly benefit your family.
Ready to protect your wealth?
If you want to get more out of your personal savings and investments, the experts at Dental & Medical Financial Services can help. Our advisers will help you manage, organise, and preserve the wealth of your portfolio, so get in touch to start protecting your money today.
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