How to increase your savings in times of high inflation

With an inflation rate reaching all-time highs and a raise in pay failing to match that, the prospects of increasing your savings appear quite dim. However, there are strategies which are suited for these difficult times, through which you will see your nest egg grow

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The first step is to make a budget. As a rule, the budget is monthly. You can now draw a two-column table on an Excel sheet. On one side, write the amount you earn—or the amount your household earns— from wages, rent received, interest, etc. On the other side, put all the expenses you incur during the period in consideration, whether recurrent, like light bills or the mortgage payment on your house, or sporadic, like buying an electric appliance.

Using this map, you’ll be able to see which expenses take the biggest chunk out of your family budget. You can even mark (with different colors) those that are essential to differentiate them from those that are incidental. This exercise will help you understand which expenses you should start to reduce or even eliminate.

Pay yourself first

Put a figure on it: tell yourself that you must save something every month—in other words, you ought to pay yourself first. The percentage rate you save needs to be within your financial comfort, depending on your income; it could be between 5% and 20%. How much you save is less significant; the most important thing is to start encouraging a saving habit.

This way, the amount to be considered in the income column in your family budget must already be deducted from the amount you withdrew to pay yourself.

Reduce your expenses to the maximum

By marking out which expenses are essential and which are incidental, as we have already indicated, in your household budget, you will be able to see where you can cut back. The ideal is to start reducing or even eliminating non-essential expenses . For example, if you are incurring restaurant expenses, try to make your own food at home or carry some to work as opposed to eating out in a restaurant. This will help you cut down these expenses, which is possible only if you reserve this for special times.

Do you spend too much on attires and fashion accessories? You can try to cut down this expense by purchasing these types of products only during sales or in promotions. You can even try buying secondhand. You will get good products at good prices.

The division between essential and incidental expenses does not mean that you should not touch the essential ones. You can perfectly well evaluate these expenses and try to reduce them as much as possible . Let’s look at some examples:

Electricity costs are important, but one can attempt to bring down the figure on the bill by, for instance, changing the normal light inside one’s home to energy savers, or by simply avoiding leaving the light on when there is no one in that room.

Grocery costs are an absolute necessity, but you can always have private label products because they have a good quality-price ratio, and, once in supermarkets, take the best advantage of promotions and of the benefits that loyalty cards bring along.

Fuel costs are also essential, but you can also reduce this cost by walking short distances instead of using your car, opting for more defensive driving or starting to use public transport, these are some examples that allow you to save on this item.

Increase your income

If you can’t cut any more expenses, it is time to look at the other side of the table—that is, your income. If your total income level doesn’t let you achieve the savings you want, then the solution will have to be to increase your income. How? For example, you can get a part- time job , or focus on something you enjoy and try to earn some extra money from it. Do you like cooking? You can start taking food out, take advantage of the potential of social networks to promote your “business”. Do you love animals? You can start doing pet sitting . Promote your services among your family and friends.

Do you have something at home that you no longer use? Sell it. Create an ad on digital platforms such as OLX and earn extra money with those objects that you no longer need.

Invest the money you managed to save in products with profitability

Once you have saved, the next step is to make the most of your savings . But where should you invest? Term deposits are an investment product that is very popular, as they have guaranteed capital. However, there are other solutions that you should look into to make the best decision for you.

Investment funds

If you are open to investing with risk, consider investment funds , as these products can achieve interesting returns . In this situation, be prepared to make a long-term investment in order to cushion any potential devaluation of the fund.

Retirement Savings Plan

You can also choose to set up a Retirement Savings Plan (PPR) . There are products on the market with guaranteed capital and others without. The latter, on the other hand, offer higher returns. By choosing to invest in a PPR, you will also obtain tax benefits . The amount to be deducted from your IRS depends on your age, that is:

  • If you are aged less than 35, you can deduct up to 400 euros, on the condition that in a year you invest an amount of no less than 2,000 euros;
  • If you’re aged between 35 and 50 years old, it is possible to realize a discount of, at the most, 350 euros, being necessary to invest 1,750 euros in one year;
  • Individuals over 50 years get a deduction of 300 euros, given that, in a year, they invest 1,500 euros.

Savings Certificates

In terms of products with guaranteed capital, there is also the option of Savings Certificates. Their profitability is indexed to the 3-month Euribor , up to a limit of 3.5%, in addition to receiving a retention bonus from the second year onwards:

  • 0.5% from the start of the second year to the end of the fifth year;
  • 1% from inception at the beginning of the sixth year until the end of the tenth year.

The term of the certificates is 10 years, interest is paid quarterly and is capitalized.

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