Preparing for the rising cost of living – 5 essential tips
The media is full of news about the rising cost of living and, unsurprisingly, it’s at the forefront of many of our minds.
With the proven link between money worries and mental health, we’ve done our research and aim to make you aware of what’s happening in the market so you can feel prepared, and to provide you with a top tip or two to help reduce the pinch.
UK inflation is sitting at 6%, the highest rate for 30 years, and this could increase over the rest of the year. Already we have seen that people are making cutbacks, with the latest data from the Office of National Statistics (ONS) showing retail spending volumes falling by 1.4% in March 2022 [¹]. This reduction in spare money is affecting saving also, with 54% of people citing rising living costs as the main reason for reducing savings [²].
Which bills have gone up and how can you mitigate the impact?
Energy
Regulator Ofgem confirmed that the energy price cap is increasing by a record 54%, meaning a nearly £700 annual rise in bills for the average household who pay by direct debit. It’s likely to get worse in October, when the cap is reviewed again, and experts believe bills could rise by a further 40%, bringing energy bills to £3,000p.a. for the average household.
Top tip: We can reduce costs by making small changes to the way we live and this is helped by the fact that summer is on the way. MoneySavingExpert suggests using a hot water bottle to heat yourself rather than your house [³]. Hang out your washing as the weather gets better rather than using the tumble drier and switch off the lights and radiators in the rooms you don’t use.
Another easy way to save on your energy bills is to get into a habit of switching off appliances at the plug. UK households could save an average of £147 per year by switching off these ‘vampire devices’, British Gas research suggests [⁴].
Broadband, mobile phones and TV
A number of broadband, mobile and TV companies have announced price hikes. Sky will increase its broadband and TV prices by around £43 per year. Vodafone has also increased their prices by 8%. Netflix has shown the first reduction in subscribers following rapid growth during COVID as people cut-back on premium services.
Top tip: Before renewing, it’s key to do a quick comparison and check if you can get a better deal elsewhere. Many companies will match offers from their competitors. If you can do with a slower speed, or less calls and texts, you’ll make a saving by switching to a package that offers slightly less.
Food
The cost of the weekly food shop is increasing, with nine in 10 people reporting a higher bill at the checkout, according to the ONS. Grocery prices inflation hit 5.2%this month, rising to its highest level since April 2012 [⁵].
Top tip: Download your supermarket’s free loyalty app - this makes it easy to scan and collect any points or vouchers you’re entitled to. These can then be redeemed for a pounds-and-pence discount off the cost of your grocery shop! Check out this article when deciding who has the best supermarket loyalty scheme.
Different supermarkets can provide different value, look for offers and don’t be afraid to try different products or brands. Remember to check your employee benefits for any discount schemes too.
National Insurance
National Insurance has risen by 1.25 percentage points to raise money for the NHS and social care, which effectively means someone on an average wage will pay 10% more.
Top tip: Ask your employer about salary sacrifice. Salary sacrifice schemes allow employers to reduce an employee's salary and pay the equivalent amount of the reduction into a non-cash benefit, such as pension contributions. As benefits are paid instead of salary, National Insurance contributions are reduced for both you and your employer.
Tips to continue saving during this time
Make it affordable: With Cushon, employees can save from £10 a month straight from pay. It is better to be saving something instead of nothing at all, and many of us will need to review whether our current saving habits can continue. Cushon’s aim is to make the process of saving and investing inclusive, easy and accessible for everyone.
Round ups: You will continue to spend, even if it is reduced, and a great way to build up some out of sight savings is to utilize the ‘round ups’ feature we’re seeing across many banks such as Monzo, Nationwide, Lloyds, and Starling Bank. This is simply a pot linked to your bank account, and if you spend 80p it rounds up and the 20p goes into a separate pot. A great tool to utilize.
Resources: It’s key to not bury your head in the sand and engage with your finances more than ever. Whether it be podcasts, Instagram profiles, newspapers or online forums, stay engaged as you’ll pick up on products and schemes that suit you. Click here to listen to Sarah Steel from Better with Money take you through some of the key things to tackle, so you're more confident about how to manage in the face of rising costs.
[¹] Retail sales, Great Britain: March 2022
[²] Cushon’s survey, April 2022
[³] https://www.moneysavingexpert.com/utilities/heat-the-human-not-the-home-save-energy/
[⁴] https://www.bbc.co.uk/news/technology-61235367
Article by
NatWest Cushon
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