Consumers have been feeling the heat of rising inflation for the last few months. Though the number seem to have come down marginally to 11.89 per cent (for week ended July 12), there seems to be little respite. Such times force the individual to take a relook at their savings strategy and monthly budgets. The basic idea is to do things smartly to save on costs. Of course, there is a rising interest burden as well that makes things worse.

In such uncertain times, your investments need to deliver higher returns to break even. For instance, if the inflation is touching 12 per cent, you will have to earn 17-18 per cent pre-tax (for the highest income bracket) so that there is no capital loss.

• Inflation, the silent killer

While keeping idle cash in banks may seem like a safe and secure strategy, it can never protect the purchasing power of your money and will lead to wealth erosion. But cash certainly has its uses. It can be used to retire or reduce high-cost loans.

Also, make long-term investments in gold and equities to beat the inflation in the long run. At every sharp dip, you can increase the equity exposure in-line with your asset allocation.

Gold is also a good idea, if the scaling is done in a staggered fashion. Though in the short term, gold might not deliver, it will always do well in the over time. Some jewellers are offering gold without any additional making charges now.

Even investment in residential property is a good hedge, but some correction is due in the prices.

As far as your monthly budget goes, have a savings budget rather than an expense budget. During high inflationary and interest rate periods, do not succumb to the pressure of reducing your saving. Instead spend smartly.

Some of the smart spending measures that you can take up include cutting down on areas that are a part of lifestyle inflation. These would include:

Reduce your expenses on watching movies. Rather watch them on off-days when ticket prices are substantially lower.

Eating out can be an expensive affair. For most professionals today, dining or having lunch outside constitute a significant part of their monthly expenses. Reducing the frequency could be a good idea. In fact having more parties at home can be a cheaper idea.

Electricity bill is another area where cost-cutting can be done. Instead of keeping the home AC on for several hours, use it for a few hours less. Similarly, switch off the appliances and lights when not in use.

Cut your fuel costs. Using public transport or car pools could be a cheaper option.

Go to the big malls once or twice a month and stock up on your grocery items. This can insulate you from not just rising food prices but also lower your transportation costs.

Avoid big purchases. Smart spending does not mean being stingy but focusing on your priorities and expenses that should be done (Children's tuition fees is certainly far more important than eating out several times a month or taking a short vacation.)

For people, who cannot control their mobile expenses, should opt for pre paid cards.

Most importantly, do a monthly review of your credit card and bank account statements. This would help you to pin-point areas where expenditure can be cut. For instance, recently when I checked one of my dormant accounts, I realised that the bank was charging me Rs 500 every month even though, I was told there will be no charges.

This list is by no means exhaustive. But making a start will definitely help to keep your financial health secure.

The writer is director, My Financial Advisor