After a five-week hiatus from all things work-related thanks to paternity leave, I greeted the Trustnet team with a simple question: what did I miss?
The overwhelming response was: inflation – again. Indeed, it appears that while I have been away things have rather got out of hand, with forecasts suggesting that prices could rise 18% later this year, according to Citi Group analysts.
That’s not even the highest prediction, with analysts over at Goldman Sachs dialling up their inflation expectations to 22%, or two Spinal Tap amps to use the official measurement.
The cost-of-living crisis is already proving difficult for many, with concerns around the upcoming energy price cap hike affecting most, if not all, of us.
Cutbacks will be where some will start, whether that be moving supermarkets, fewer evenings out, or cancelling all of those rarely used subscriptions, but with energy bills expected to double this winter, it is unlikely to completely solve the issue.
Some may need to dip into savings, which I myself have had to do already this year. Those in retirement, for example, will need to reassess their income needs on the fly and make potentially big changes to their pots.
The common (and eminently sensible) advice would be to use a financial adviser if you are unsure, however if you are in charge of your own – or someone else’s – finances, there are some basic principles that many preach in times such as these.
First is to use up cash first. This may sound simple, but it is better to use up any rainy day savings that are sat in bank accounts than it is to plough into your investments.
If your only source of savings is an ISA or other investment account, then the next best thing to do is to take money from your lowest-risk options. This assumes that the money you leave will be invested for years and therefore the higher-risk assets have more chance to recoup their value (if indeed they are down this year).
As a last resort, investors should sell the assets that have fallen substantially. After all, a loss only becomes a loss when it is locked in. Until then it is just a minus figure on a bit of paper.
I sincerely hope that the next few months are easier than some anticipate and, with a new prime minister on the way, there is hope that extra support will come in time, although whether this happens remains to be seen.
However you make it through what is undoubtedly going to be a challenging time for all of us, we will remain writing articles on the world of funds and investment trusts, in case you are able to squirrel a little bit away each month.