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Written by Wesleyan

Cost-of-living crisis – impact on medical professionals

doctors
3 min read
Man sitting at desk with laptop on phone

On top of the ongoing pressures being faced by the medical community currently, the last thing you need is additional pressures from a turbulent financial landscape.

We’re currently facing an amplified cost-of-living crisis, spurred on by a rise in the cost for transport, fuel and a large leap in energy prices. In fact, the consumer price index hit its highest rates in 30 years in December 2021 and has increased further since. The reality is that there are very tangible impacts for the medical professions, from a personal finance perspective.

To protect your wealth, one way to overcome this particular financial hurdle is to think about other ways you can make use of your savings. The money you hold onto as cash slowly loses its buying power due to inflation. However, by investing, you can expect to achieve higher returns over time, with the aim of at least beating inflation.

Here are the top areas for consideration: Impact of inflation and erosion of savings

Inflation is expected to reach around 7% this year, which is more than triple the Bank of England’s 2% target. What this means for those who have large funds sitting within savings accounts is that their savings are at serious risk of being eroded by inflation over time.

The Bank of England has already nudged up its interest rate this year, to help combat inflation. However, most people won’t have noticed a positive impact on their finances, especially with UK wage growth slowing and rising energy and food prices.

The reality is that the best easy-access savings rates on the market currently don’t come close to competing with inflation rates as they currently stand and won’t be able to until inflation falls back down to the Bank of England’s 2% target. It’s uncertain when that will be.

Many of the medical professionals we support are conscientious savers and to protect your wealth, one way to overcome this particular financial hurdle is to think about other ways you can make use of your savings. The money you hold onto as cash slowly loses its buying power due to inflation. However, by investing, you can expect to achieve higher returns over time, with the aim of at least beating inflation.

You won’t have easy access to your money during the investment period, but it could help put you in a better position to ride out the storm and retain as much wealth as possible, particularly with a long-term approach. Of course, it is worth remembering that investing needs to be in line with your risk appetite and it is a possibility you may get back less than you invest.

What does the crisis mean for your retirement plans?

If you’ve worked out what you need to retire on based on 2% inflation as an example, how much more will you need to save to retain the same standard of living if inflation remains above that level for a sustained period of time? How much harder would your investments need to work?

These are the questions you need answers to in order to secure your retirement plan from derailment during this type of economic turbulence.

Whilst your your NHS Pension Scheme benefits are index linked to protect it from rises in the cost of living, it’s important to consider other options when planning for your retirement.

Please remember the value of investments can go down as well as up and you may get back less than you invest.

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