The cost-of-living crisis is causing us to hoard deposits – last $143 billion, but plenty if you’re scared of what lies ahead.
Irish consumers became increasingly concerned about the overall ‘macro’ outlook [this year]”, says KBC in its latest business paper. “Seven in ten expect the Irish economy to weaken in 12 months, while almost half expect unemployment to rise,” she added menacingly.
While 12 percent of consumers say they can handle an unexpected financial emergency from current income, the “safety nets” in many households are limited. People are very nervous about household finances, but the reaction doesn’t make sense.
We are married to “savings,” often just for their own sake. Although there is obviously a cohort of people who have nothing left at all, and conversely, households with huge cash reserves (e.g. the fact is we are afraid of it getting worse.
Research from the Bank of Ireland showed evidence that those with liquid savings do not consider investing because they are afraid of “losing money”, not knowing where to start and wary of “advice”. However, the only guaranteed way to lose money is to leave it on the deposit. Your €100 in 2021 is worth €94 or less today and less than €90 by the end of the year.
Here are some ways you can boost household finances in the short-term to make longer-term decisions a little more palatable:
While holding an emergency fund is sensible and prudent, finance guru John Lowe says three months is enough, or six if you have a mortgage, kids and a car. “If you’re in a committed relationship, you should both have access to this fund. A third should be accessible immediately, the rest on reservation for a consideration”. Government savings still earn tax-free interest, albeit little enough. Even early termination simply means you lose the interest, the principal is intact, so you have nothing to lose.
Cash is a waste if you don’t absolutely need the money within 5-7 years. Speak to a finance broker for independent advice on your options. People want low-risk returns these days, and there are hundreds of well-managed funds to choose from that offer just that.
Be ruthless to infidelity! Download apps from any supermarket and take advantage of them all. Once the algorithm realizes that you’re not shopping at the same place every week, the deals become more attractive. The methods preferred by penny pinching grannies still work best: Make a list and stick to it; bulk purchase of non-perishable goods; Use private label whenever possible and don’t shop when you’re hungry. For larger ticket items like furniture or clothing, consider Klarna, the interest-free pay-now-buy-later app, to spread payments over three months, but only if you’re not overspending.
If you’re feeling ambushed before payday, you’re probably a poor money manager. By downloading a budgeting app, you can be more disciplined about where your money actually goes. AIB customers’ MyMoneyManager propagates and displays expenses as soon as it learns your patterns. Mint and Spendee are good too (the latter links to AIB, BOI, An Post and Avant). YNAB (You Need a Budget) has a 34-day free trial ($14.99 after that). CCPC.ie has a good budget planner and expense calculator. Spendingtracker on the Apple Store is in pounds but has great features.
Reducing fuel and energy costs is the big issue for 2022. It’s almost impossible to control the future, so ignore the utilities who say they’ve cut fuel prices or have “green” rebates – that’s basically nonsense . Instead, reach for the gimmicks. They want your business, so claiming your free Hive, Climote, Cashback or Supermarket vouchers makes a difference.
If you’re on “level pay” your payments will be spread over 12 months and you might find a loan at the end of the year, especially if the government repeats the “€200 free” loan. Set your thermostats on summer programs with water and radiators at a lower temperature. Be modest in your needs. Stop using high-energy appliances like clothes dryers and cut down on the number one culprit: high-pressure pump showers. 12 minutes a day costs 128 euros per person per year for electricity alone.
According to EnergyD, turning off the water when lathering saves €96 and running it at a lower temperature from May to October saves another €16.
According to Newstalk tech reporter Jess Kelly, TV subscriptions alone can pay over €1,400 a year. If you’re just watching one series or mindlessly switching between Prime, Now and Netflix, it’s time for a proper review.
Get that tax back
Taxes can sometimes be a one-way street, all uphill, but it’s a two-way street and there’s plenty of money back if you just look for it.
Earnings allow you, in most cases, up to 4 years of reclaim over a wide range of tax credits and relief that you may be entitled to. If you don’t feel like doing the paperwork, then hire someone to do it for you for a reduced or fixed fee. Taxback.com, Redoak.ie and TaxAssist.ie are all good and should easily pay for themselves with the money you get back.
The most overlooked refunds are:
– Healthcare spending: 20 percent is allowed on everything from GP visits to medication (including spending under the Drug Payment Scheme of €80 in the evening), certain medical supplies, groceries (e.g. for celiac disease, diabetics, etc.) and there is no deductible. Anything not covered by your private health insurance can be added to your entitlement. You don’t even have to send in receipts (although you are required to keep them).
– Home Care Tax Credit: If you are staying at home with care (children or dependents) and are filing jointly, an additional credit of 1,600 is available.
– WfH tax credit: only 10% of those entitled to claim benefited from this tax credit. On the days you work from home, you can save 30 percent on your gas, electricity and broadband bills. It’s crazy not to say it, especially right now.
The bike-to-work program has been increased to €1,500. Get on the bike!
https://www.independent.ie/business/personal-finance/your-money-how-to-beat-the-inflation-squeeze-41648406.html Your money: How to overcome inflationary pressures