Among the turmoil affecting many professional rugby clubs this year, the headlines in 2023 have also focused a great deal on inflation.

Inflation is the rising cost of goods and services over time, measured from year to year. Generally, the Bank of England aims to keep inflation at 2% a year. However, the Office for National Statistics has recorded inflation to exceed this target in every month since August 2021.

It reached a high of 11% in October 2022, and fell below 5% for the first time since October 2021 in the 12 months to October 2023.

Rising costs can particularly be a problem for you as a rugby player if you are on a long contract. It means that even though you are earning the same amount (excluding performance or appearance bonuses and any other income streams), your money is technically losing value in real terms, because you will be able to buy less with it than you could before.

While you might notice the effects of inflation on your income each month as you spend more to contend with the rising cost of living, there is also a significant psychological element.

That is because rising costs can cause you to fall victim to a bias known as “inflationary psychology”. This phenomenon can significantly affect the way you manage your wealth, and cause you to potentially make less sensible decisions with your money.

Read on to find out what inflationary psychology is, how it can affect your wealth, and a few steps you can take to prevent yourself from falling victim to it.

Inflation can drive you to make purchases before you really need to

When inflation is rising and the cost of living is becoming more expensive, you may understandably look for ways to protect your wealth.

One method that many people use is to buy goods and services ahead of actually needing them. The logic here is the hope that they will purchase them at a lower price before the cost then subsequently rises.

This seems like a sensible approach. However, inflation is largely driven by the demand for goods and services. That is, when everyone wants something that there is not much of, the price goes up as there is more competition.

In turn, that means panic buying items in an attempt to lock in a price like this can have a knock-on effect of driving inflation even higher.

This is exactly how inflationary psychology works. It means getting into the mindset that pre-emptive spending could help you to save money.

In fact, if you and millions of other people are trying the same strategy to make these savings, all it really does is raise prices further next time you go to buy something.

3 tips to help manage your money during times of high inflation

Realistically, there is nothing you can do individually about inflation. Even if you break the psychological habit of trying to save money by spending ahead of time, you still cannot control supply and demand, or how other consumers will behave.

That is why it is important to look inward and control your wealth as best you can. These three tips could help you to manage your money when costs are rising.

1. Review your budget and check you are spending sustainably

Having a budget for your wealth is crucial. It helps you visualise your income and spending, and ensure that you are using your wealth sustainably.

As a rugby player, this can be particularly useful, as you may have multiple streams of income. That way, you can accurately see how much comes in each month, and where it goes.

When costs are rising, this can be useful as you might notice aspects of your budget where you may be able to cut back on your spending.

2. Keep your personal goals at the forefront of your mind

When making decisions with your wealth as costs rise, it is well worth keeping your goals at the forefront of your mind. What is it that you actually want to achieve with your wealth?

By doing this, you can organise your wealth around these targets. This can be instrumental when costs are rising, as it means you will not lose sight of the big picture.

As financial planners, we actively encourage this approach. When you work with us, we will always start by asking you what your goals are for the future. From there, we will help you manage your money with these aspirations as the basis for our suggestions and recommendations.

3. Make sure you are still saving for the future

Inflation can have a significant impact on your future plans, as you might try to deal with the rising cost of living by saving a little less for later and using it now.

In reality, setting money aside for further down the line remains just as important, even when costs are rising. It is vital to continue doing this so you do not end up with a shortfall when you finally come to hang up your boots.

This is especially crucial for you because of your specific career requirements. Rugby players essentially have “two retirements”: one when you finish playing professionally, and another at the end of your second career.

Read more: How financial planning can help rugby players navigate the unique challenge of 2 retirements

It is crucial to use your wealth to save for both of these events, so you are able to deal with the drop in income you will likely experience at this stage.

As a result, wherever you are in life, it is important to consider saving for later, even when costs are rising.

Get in touch

If you would like professional assistance in managing your money during periods of high inflation, then please do get in touch with us at DBL Asset Management.

Email or call 01625 529 499 to speak to us today.

Please note

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.