How to keep aneye on your finances during global crisis: Sarah Coles

That’s why it’s worth assessing what it means for your money and what you can do to protect yourself.

There have already been two immediate and dramatic effects – rising oil prices and very volatile stock markets.

The oil price doubled between January and early April, and although it fell back significantly on news of the ceasefire more recently, it’s still higher. More expensive oil has an impact at the pumps initially, but eventually it feeds into the cost of almost everything.

We all know how difficult it is to manage a budget while prices are rising, but it can help to keep a closer eye on your costs.

So, for example, if you keep the receipt from your weekly shop, it helps you keep track of how prices are rising, so you can react then and there – rather than simply running out of money at the end of the month.

Meanwhile, the stock markets have been on a wild ride, falling through March and then recovering at the start of April. At times of volatility, it’s easy for investors to feel unsettled, but the key is not to react in haste and do anything you could come to regret.

The worst thing you can do when markets fall is to sell in a panic and crystalise your losses. If you’d done that in March, you would have missed the bounce back at the start of April.

If you have a balanced portfolio that suits your needs, it makes sense to sit tight. You’ve invested for the long term, so short-term ups and downs will always be part of the picture. That doesn’t mean everyone should just sit on their hands. For some, it could be a timely reminder of how much of the portfolio is concentrated in one particular volatile investment, and an opportunity to consider diversifying or making small tweaks

If you’re close to retirement and you’re worried about your pension falling at the worst possible moment, bear in mind that if you’re in a default fund within the pension scheme, it will often automatically be moved into less risky assets as you approach retirement. If you check how your fund is doing, you could get a nice surprise at how little it has dropped.

How you’re planning to take an income from your pension will also make a difference to how you react. If you want to use drawdown, you don’t need it all immediately, so you can time withdrawals carefully. In this case, your emergency savings will be a godsend.

In retirement you should aim to have enough savings to cover between one and three years’ worth of essential expenses. That way, if markets fall, you can dip into your savings for a while to stop yourself having to take money from your pension when markets are down. This stops you eroding the pot and damaging its chances of recovery. When markets are back up, you can top up your savings and take money from your pension again.

If you’re planning to buy an annuity, it’s worth doing the maths to check if you can still get the income you need. Even if the fund has fallen, there’s hope, because annuity rates have risen recently.

When prices are expected to rise faster, the market assumes that interest rates will go up too - as the Bank of England works to keep inflation under control. When it thinks rates will be hiked, government bonds look less attractive – because the return looks poor compared to cash.

It means the price of bonds fall and the yield (the income you get on the bonds expressed as a proportion of the price) will rise. Bond yields are used to price all sorts of things, including annuities, so if you’re planning to buy an annuity, you can get a better income. Someone aged 65 buying a single life level annuity with £100,000 could currently get an annual income of as much as £7,840.

Bond yields rising is also good news for savers, because they affect the rates on offer. It means that the top savings deals have nudged up, so at the time of writing it’s possible to make 4.5 per cent on easy access savings and 4.66 per cent by fixing for a year. Some people may be tempted to wait before fixing, in case they rise again, but there are no guarantees, and given the decent deals around now, you may decide to act fast.

The other market that’s driven by bond yields is mortgages. Fixed rate deals will tend to be set in what’s known as the ‘swaps market’, where prices are heavily influenced by gilt yields. When those rise, mortgages will also usually rise. Since the start of the war, rates have risen by around one percentage point, and deals aren’t hanging around for long.

It’s difficult to know what to do if you’re coming up for a remortgage in a difficult market, so it can be a good idea to hedge your bets. You can lock in a rate with your existing provider between three and six months before it expires. Don’t worry about getting the timing perfectly right, just lock it in when you can. Then when you get close to the end of your deal you can shop around. If rates have risen in the interim, you may have the best deal, and if they’ve fallen, you can remortgage elsewhere. Make sure you do this at least 14 days in advance, so you can still cancel the deal you locked into.

There will be people wondering whether to opt for a fixed rate despite the fact they’ve become more expensive, or whether they should go for a variable rate in the hope that in a less turbulent world rates could come down. The decision will depend on how much risk you’re prepared to take. If you opt for a variable deal there’s the hope of cuts further down the road, but if prices stay higher for longer, you will pay the price. For a lot of people, the mortgage is their biggest monthly outgoing, so there’s a great deal of value in certainty.

There are no easy decisions in this volatile world and no guaranteed winners, but if you consider your options and do what you can to protect your finances, then at least you should steer be able to stave off your own personal dystopian future.

Petrol prices

There could be a glimmer of hope for drivers, after this week saw a halt in petrol price rises. They’d risen for an astonishing 43 consecutive days, according to the RAC. The temporary ceasefire brought oil prices down significantly, cutting the wholesale price, and pausing the hikes.

We’re not out of the woods yet as prices are still far higher than before the war – with petrol up from 133p in February to 158p. And although prices are expected to drop from here, more twists and turns in international relations could still push prices higher. However, motorists who have been dreading worsening news at the pumps will be grateful for a sliver of good news.