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How To Beat Inflation: Three Steps To Make Your Money Go Further

16/06/2017 12:11
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Inflation has hit a record high, but can you beat it?

Inflation is now over 2.7% and people are feeling the pinch. Some are even whispering the word, recession. But others are managing to spend less. Google searches for "cheap", "deal" and "free" have climbed 10 - 20% in the last month.

You can think of inflation like a tax. Straight out of your pay, a few extra pounds have been taken. You had no choice, no say, but there it goes - gone.

Inflation means prices go up so your money can't buy as much. Where you used to have a purchasing power of £100, now you've only got £97. Either you have to find a way to get more happiness from your money, or you have to make your money go further.

When reporting on inflation, financial commentators always forget to say how you can beat inflation. Here are the three steps:

STEP 1. Understand you are not average

The Government figure for inflation is an average. It looks at the average shopping basket and compares prices this month to the last. But here's the rub: nobody is average. Your shopping basket is not the same as mine, your neighbour's or your best friend's.

Do you buy protein shakes? E-cigarettes ? Spotify? All of these are measured by the Government and put into inflation figures.

In May 2017, the Office For National Statistics said "the main contributor to the rise" of recent inflation was "games, toys and hobbies". If you don't buy these things your inflation figure will be different.

You can control inflation by choosing what you buy and how much you spend. You have your own inflation figure and you are not average.

STEP 2: Never Buy Full Price

Google Trend analysis shows web searches for discount retailers Aldi and Lidl are up 10 - 20% in June 2017. Web searches for the words "cheap", "deal" and "free" are also up.

For most people inflation will force them into looking for cheaper alternatives. You can get ahead of the curve by following the cardinal rule of bargain hunters: never buy full price (NBFP).

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Google Searches for "Aldi" and "Lidl" have climbed in recent months - Source: Google Trends

How To Live For Free
, a book with a self-explanatory title, has climbed to the top of Amazon's Personal Finance category for the fourth year running. Deepak Tailor, the author, explained, "Whenever families are struggling with money book sales increase. It's like an alarm for the economy."

You can be in charge of your own inflation - how far your money goes - by being more conscious of your money. Start looking for the latest deals, use voucher codes and get cashback. There are many free tools that show you the price history of goods. Use them to ensure you're buying at a good time and never buy full price.

STEP 3: Measure your spending

Measurement is management. In Money's Big Secret I explained the 3-30 challenge: Try and survive on £30 a week for three weeks. It's difficult but not impossible. A side effect of the challenge is that it forces you to measure your spending.

From one week to the next you can see how much you spent and what you got for that money. Do this and everything else falls into place. It's like a snowball that encourages other actions, such as looking for bargains and switching to cheaper alternatives.

Inflation may be rising but you are not average. If you never buy full price and measure your own spending you can beat it. These three steps will help you make your money go further and even set some more aside.

Tom Church is co-founder of the deal and discount community, LatestDeals.co.uk

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