Winning the battle against inflation: Your two minute wealth check from Nutmeg

Savings can be a tricky world - find out how yours weigh up

ByMolly Holt

How strong are you financially? Find out here

With the cost of living going up and salaries stagnating, it’s now more important than ever to have a robust financial plan. So how well prepared are you? Find out with this super-quick wealth check from Nutmeg, the award-winning online investment manager.

1. Your savings vs spending ratio

There is a popular personal finance rule called the 50:20:30. It suggests you should aim to use 50% of your post-tax income for all the necessities in life (your rent or mortgage repayments, utility bills and food), save or invest 20%, and spend the remaining 30% on your lifestyle choices (so that's the gym, holidays, restaurants, and so on).
Does that sound like you? Or do you need to do some budgetary management to get on track? If you can invest 20% of your salary each month - great. But if you need a little more inspiration, why not see how much your regular 20% investments might grow over time using Nutmeg’s free portfolio projection tool.

Ditch the paper and pen and opt for easy online calculators instead (Photo: Getty)

2. Rainy day fund

It’s commonly advised you should have three to six months’ salary in reserve as cash – i.e. in your bank and readily available. This rainy day fund is to help you sustain your living expenses should you be between jobs or need to manage another unforeseen life event.
Do you need to bolster your emergency fund? Or perhaps you have more than enough already stored up, in which case…

3. Put your money to work

Always make sure your surplus cash is working as hard as it can for you. If the interest you’re earning on your savings is below inflation, you’re effectively losing money. It’s worth shopping around for the best savings rates offered by the high street banks or to consider low-cost, high-performing investment products.
“Interest rates have been quite low for a while and inflation has hit its highest level in almost four years,” says Nutmeg CMO Katie Prentke English, “this is perhaps why frustrated savers are now considering investing rather than saving. Over the longer term, investing offers the potential for inflation-beating returns. Investing isn't easy per se, but getting access to smart wealth management is. You can open a Nutmeg portfolio online in less than 10 minutes with as little as £500.”

4. ISA: Use it or lose it

There is such a thing as too much money in the bank - be aware of other savvy saving options (Photo: Image Source)

Every year we get an ISA (individual savings account) allowance from the government. This year the allowance is £20,000 – the highest ever. You can save or invest any amount up to £20,000 into an ISA and any returns or interest you might make on your money in the ISA will be free of income tax and capital gains tax.
Are you making the most of your ISA allowance? Use Nutmeg’s ISA calculator to compare the typical returns you might expect from cash ISAs and stocks and shares ISAs.

5. Take the long road

Once you’ve sorted your budget and rainy day fund, and shopped around for inflation-beating savings or investing options for the medium and long term, your personal finances should be in a much better position.
But don’t forget to also think much further down the road – as having a longer-term financial plan is crucial. A key part of that plan is your pension... is yours sorted? Use Nutmeg’s online pension calculator to see if you’re on track to receive the retirement income you’d like.
Culled from Mirror pension