I am particularly proud of the rhyming title of this blog.  I should have been a poet but I didn’t know it!

 

In my last blog, I wrote the following.

 

So what should you do to survive the future debt crisis and grow your wealth?  Well in my opinion there are three ways to do this.

 

• Invest in assets which at least keep pace with, and ideally, beat inflation, such as shares and property.

• Pay off as much of your debts as possible and, if you have a mortgage which you cannot yet pay off, at least take out a low interest fixed rate mortgage for a term of up to 5 years.

• Tighten your belt.  Reduce your discretionary expenditure and shop around to reduce your necessary expenditure.  In other words, run a tight budget.

 

Follow these steps over the next few years and you will have a fighting chance of increasing your wealth and your net income until the current economic cycle turns.  You know it makes sense.

 

 

I’d like to expand on my above tips in this week’s blog.

 

Invest in inflation-proof assets

 

This has been my mantra all of my financial planning career.

 

We live in a country that is doggedly inflationary.  What’s more the inflation measure used by government, CPI, vastly understates the true inflation rate which is more accurately measured by the annual increase in money supply which is estimated to be at least 10% compared to the latest CPI inflation rate of 3.5% as at November 2024.

 

So you have to invest in assets which are inflation proof.  In my lifetime’s experience the following assets have proved to be the best hedges against inflation.

 

• Quoted shares on public markets
• Private equity
• Your own business
• Property
• Gold
• Bitcoin
• Collectibles
• Index-linked National Savings Certificates (when available)
• Index-linked pensions

 

Pay off debts and/or reduce your interest expense

 

Pay off your bad debt before your good debt.

 

Bad debt is any unsecured credit such as credit cards, personal loans and overdrafts.  Pay them off in order of interest rate charged.  In other words pay off the unsecured debt with the highest interest first, then the next highest etc.

 

Then pay off good debt such as mortgages.

 

If you cannot pay off your debts then at least consider replacing them with lower interest charging debts and maybe change the term of the debts which can also result in lower or higher  monthly repayments whichever you prefer.

 

Do be aware that there are likely to be penalties for early repayment of debts so you need to sense check your decision making.

 

Obviously if you have some cracking deals like an interest free personal loan or a low interest fixed rate mortgage you may decide not to pay them off at all at this stage unless you positively hate all forms of debt and it worries you.

 

 

Reduce your cost of living

 

Now this doesn’t have to be painful.  I am not advocating living the life of a pauper.  I’m simply suggesting finding a few simple ways to reduce your overheads without materially reducing your standard of living.

 

Start off with compiling a list of your monthly living expenses then divide it between necessities (rent or mortgage, Council Tax, utility bills, food etc) and non-essentials (holidays, entertainment, meals out, hobbies, holidays etc).

 

Then review the list and choose which items could be cut and brainstorm ways to do it e.g. change utility provider, change your mortgage deal or remortgage with a new lender, eat out less often, spend less on holidays or take less holidays and so on.

 

You’d be surprised but with a little planning, you could reduce your living costs quite a lot.

 

So there are my three tips for how to survive and thrive in 2025.  I wish all of my readers a wonderful New Year that will be full of cheer.  That poet in me can’t stop coming out!  Make 2025 your best year ever.  You know it makes sense.*

 

 

*RISK WARNING

The value of investments can fall as well as rise. You may not get back what you invest.  Your home may be repossessed if you do not keep up repayments on your mortgage. Don’t invest in Bitcoin unless you’re prepared to lose all the money you invest. This is a high‑risk investment and you are unlikely to be protected if something goes wrong. The information contained within this blog is for guidance only and does not constitute advice which should be sought before taking any action or inaction. All information is based on our current understanding of taxation, legislation, regulations and case law in the current tax year. Any levels and bases of relief from taxation are subject to change. Tax treatment is based on individual circumstances and may be subject to change in the future. The Financial Conduct Authority does not regulate tax planning, estate planning, or trusts.  This blog is based on my own observations and opinions.