UK households are currently in the grip of a mounting cost of living crisis, with overall inflation peaking at a 30-year high of 6.2% in February before further rising to 7% the following month.

The 1st of April also saw the energy price cap increase, with the average combined gas and electricity bill rising from £1,277 to £1,971 per annum – an increase of 54%. To add insult to injury, the cap is forecast to rise again in October, leaving a large number of households in real concern about how to make ends meet this year.

Even higher earners are now feeling the squeeze, especially with annual salary hikes and the interest rates offered for most bank accounts currently so out of kilter with inflation. Stay ahead of the game and make the most of your savings and earnings this year with these tips on how to protect your finances in 2022.

Create a Budget

Before you do anything else, get to grips with monitoring how you spend your hard-earned money.

Put together a comprehensive budget to track your monthly (or weekly) incomings and outgoings, ensuring that you update the costs whenever there is a significant change. Not only does this help to ensure you stay in the black, planning your monthly spend highlights any areas where savings could be made, even if it is as simple as prioritising local produce of imported goods. It also gives you an accurate idea of how much money you could put towards non-essential but desirable purchases such as a holiday.

Furthermore, having a budget will help you to track the rising cost of living so that you can have more confidence and clarity in the value of your longer-term savings. Especially if you are saving for a big life event such as a deposit for a child’s first home or contribution to their wedding, seek out expert financial planning advice for insight into how best to optimise your earnings over time.

Invest in Stocks and Shares

While this method is not for everyone, investing in stocks and shares can be a great way to beat bank interest rates and find opportunities for growing your finances.

Of course, new investors can be intimidated by the idea of putting their money into a fluctuating marketplace rather than a stable bank account, but with low, medium, and high-risk investment prospects on offer you can control how much of your disposable income you commit to the venture.

Especially when you are new to the stock market, it is important to understand key market trends and listen to the financial experts before starting out on a relatively small scale. You can then consider scaling these efforts over time, depending on your experience and level of profitability.

Don’t Pause Important Outgoings

During periods of economic uncertainty, it can be tempting to seek out ways to temporarily reduce your outgoings to give you more spending power month-on-month. Popular methods of generating the highest possible take-home salary include slashing pension contributions and putting mortgage payments on hold.

Although initially these changes may feel beneficial, short-term money-saving tactics are unsustainable. Loans like mortgages have to be repaid at some time in the future and it is best to assume a longer-term outlook to ensure that you stay on top of your repayments. Similarly, do not deny yourself the vital protection of your pension pot simply to satisfy your current spending needs.

Navigating the current financial landscape over the next few months is sure to have its challenges, but a long-term outlook and concerted effort to maximise your salary and savings will ensure your finances are protected in 2022.