Savings tips from PPS Financial Planning

James Mullane, Director of PPS Financial has 15 years experience in financial services. He has experience advising public and private sector clients. Here he talks about trying to reduce the impact of inflation on your quality of life:

While the pandemic has undoubtedly caused very difficult health and social issues, it has also caused financial hardship for many. This is what you would characterize as a K-shaped recovery, in that some sectors are up while others are sadly down.

During our last recession, many industries emerged unscathed, but others unfortunately suffered. This time it’s the same. Many industries are just starting to recover, such as hospitality, retail and tourism. While the technology sector and the construction sectors are booming.

Ireland’s inflation rate as measured by the consumer price index has started to rise with a rate of 4% expected this year after hitting a 20-year high in December 2021 of 5.5%.

Inflation is not a problem if your income is growing at a similar rate, if it is not, your disposable income will be affected. Industries like construction and technology are experiencing significant wage inflation, but the industries mentioned above that are just recovering from the recession are not.

As global growth slows and inflation rises steadily, central banks are between a rock and a hard place. They could fight inflation by raising interest rates and reducing monetary stimulus, but that could still slow economic growth. If they don’t raise rates and reduce monetary stimulus, inflation could continue. Our best hope is that inflation comes down and they can continue with the low rates and monetary stimulus that we have grown accustomed to.

In the meantime, there are some things we can all do personally to try to lessen the impact of inflation on our quality of life.

  1. Take care of your health – doing your best to take care of your health is the best financial decision you can make. Eating the right foods and getting enough exercise are very important for our long-term health. Explore what works for you, whether it’s walking, team sports, or swimming, then, as Nike says, “Just Do It.”
  2. Claim on your medical expenses – many people pay large monthly premiums to their health insurance providers, but do not claim reimbursement on payments to consultants, physiotherapists, etc. what they can do with their font. Laya, VHI and Irish Life all have an app that makes this process very easy. Also remember to call each provider annually to review your plan for savings. There are many allowances that can be claimed by filing a tax return. Medical expenses such as physician and consultant fees, specialty dental care, items or treatment prescribed by a physician or consultant, to name a few. The tax reduction on medical and health expenses is granted at 20%.
  3. Rent an emergency room – if you live in an area where there is a housing demand, such as near a hospital or a university, you can rent a room in your main residence for up to €14,000 per year excluding taxes. Until the pandemic is under control, it is understandable that people are slow to take advantage of it.
  4. last minute stroke – If you are about to retire, are an employee and a member of your employer’s pension plan, you may be able to pay a “last minute stroke” as a lump sum towards your retirement. You may be able to claim a tax refund for the current or previous tax year of this payment. If you qualify, the lump sum can then be withdrawn after retirement tax-free.

  5. Purchase aid scheme – the purchase aid scheme is extended until December 31, 2022. There is now a tax relief of the lesser of €30,000 * 10% of the purchase price of new housing or the construction of a self-build * The amount of income tax paid four years prior to applying
  6. Claim your lump sum expenses – Lump Sum Expenses reduce your taxable income to cover the cost of equipment you need for the job. People in over 150 different types of jobs such as teachers, nurses and chefs can claim this expense. A nurse, for example, could claim up to 40% of €733 per year when she is forced to wash her uniform.
  7. Claim on your retirement and income protection plans – I have met many clients who have been paying income protection and retirement plans for many years and do not claim a tax refund on those payments. Up to 40% can be claimed on payments to eligible policies.
  8. Review insurance – review your existing home, life and automobile insurance each year. Big savings can often be made on these types of insurance with no reduction in benefits.
  9. Tax relief for working from home – If you work from home, you can get tax relief on expenses such as lighting, heating, telephone and broadband. If your employer pays you the allowance, you can collect up to €3.20 per day without paying tax, PRSI or USC on it. If your employer does not pay you an allowance, you can apply for a tax reduction at the end of the year.
  10. Joint assessment – If you recently got married, make sure you are jointly assessed for tax. A married couple and one person earning more than €36,800 and the other less than €36,800 can earn significantly more at the lowest tax rate by becoming co-assessed.

Once we can do that, I think we should all try to get back to supporting our local shops and businesses as best we can. While the cost savings are very significant, we cannot forget the value of these businesses to our communities. They need our support.

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Public and private sector financial planning as PPS Financial Planning is regulated by the Central Bank of Ireland.

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