Understandably, the majority of adults in the UK are concerned about the cost of living. Increases in the price of food, energy and fuel have placed the nation’s finances under growing pressure. As a result, the government has come under growing pressure to tackle it. Here’s a look at what could happen and what steps you can take to protect yourself.
The crux of the cost-of-living crisis
The present cost-of-living crisis is driven by two main factors. Firstly, there is the straightforward issue of supply and demand. The global supply chain is still in the process of dragging itself back onto its feet after COVID19. It hasn’t been helped by certain world events, particularly the current situation in Ukraine.
Secondly, there is the relative weakness of Sterling in the world currency markets. This helps exporters but makes imports more expensive. In theory, the government could address the cost-of-living crisis by reducing the UK’s reliance on imports. In practice, however, this is simply not viable in the short term.
That means, effectively, the only way for the government to reduce the cost of living is to increase the value of Sterling. This would hurt exporters but would make imports more affordable. The problem with this approach is that it requires the Bank of England to raise interest rates. In other words, it would be giving with one hand and taking away with the other.
On balance, it seems likely that the Bank of England will raise interest rates to the minimum level necessary to curb inflation to acceptable levels. This may or may not mean raising them high enough to bring inflation down to a maximum of 2%. This means that everyone needs to be prepared to cope with higher interest rates as well as higher costs.
The cost of debt
If you have any sort of debt, you really need to make sure that you’re on the best deal available to you. If you have variable-rate debt, then you might want to see about transferring it to a fixed-rate product. This might not be the best value overall but would give you security.
Remember that there are still some 0% balance transfer deals out there. If you’re carrying consumer debt (e.g. credit-card debt), it could be worth checking out if you qualify for one. If not, then you might want to consider shifting to a product with lower monthly payments.
Again, this might end up costing more overall but could be worth it for the reassurance and flexibility. Try looking for a product that allows overpayments. Paying extra when you can afford it can help to keep the overall cost down.
The cost of food
The best way to reduce food bills is to cook as much as you can at home from scratch. Bulk cooking and freezing is a great way to save money. If you’re already doing this then see if you have the possibility to buy more in bulk. For example, could you put a chest freezer in a garage? Also, see if you can gather food yourself, e.g. go to a pick-your-own farm?
Switching supermarkets or shopping around for the best deals, it may mean shopping takes longer but could easily save you pounds each week.
Obviously reducing the amount of takeaways is key too, it’s a great chance to try your hand at cooking foods you might not have done before and have a weekend ‘Fakeaway’.
The cost of energy
The next few months should hopefully give some respite from the cost of energy bills. If you need a way to cool down, remember that hot water bottles can be filled with ice. Stop at about the halfway mark. This will leave enough space for the ice to melt into water.
Use this time to ensure that your home is as well-insulated as possible, it’ll be cheaper and you’re more likely to get it done before the cold weather comes back.
Ensure that you have a smart meter and start turning off appliances that are not being used. We all often forget to turn off the TV fully rather than leaving it on standby.
It’s often the simple changes that make the most difference.
The cost of fuel
Looking at the petrol stations in dismay is now a fact of life. If you can, plan ahead. Only make trips if you really need to or want to. Try to walk, run or cycle as much as possible. If you do need to travel by car, practice fuel-efficient driving. If you need to take public transport, look for the most cost-effective ticket. See if you can get a better price if you adjust your journey. There are some great apps that can help with this.
If you are struggling and need help, please get in touch.