As the UK economy topples, more people are feeling the pressure.
From the rising rates of inflation to major disruptions in supply chains, various circumstances and events have caused widespread financial strain for everyday people. Food price inflation has only just slowed down to its lowest level since February 2022, but many are still struggling.
In this guide, we’ve covered some essential strategies to cope through the cost-of-living crisis – and come out in a stronger position next year.
What is the current cost-of-living crisis?
The current economic state in the UK is being described as a cost-of-living crisis.
It’s characterised by sky-high inflation rates, major disruption across supply chains, and unaffordable household expenses. With inflation climbing to highs not seen in decades, essential goods and services cost more than before. This financial strain is not being eased for everyday people, as salaries fail to increase at the same rate.
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What can I do to cope with the cost-of-living crisis?
- Set a budget
Firstly, setting a budget will naturally keep you in better control of your earnings and outgoings too. You should base the budget based on how much money you earn and how much you can realistically afford to save and spend.
List your income and expenses. From there, you can prioritise the essentials and unavoidable costs, allocating funds where necessary. Keep an eye on your spending, making the most of budgeting tools and apps to hold yourself accountable.
- Save on household costs
Despite falling energy costs, household bills are still rising sharply. This is a major pain point for people earning salaries that are too high to allow for government help, but too low to enable saving or spending power.
To save money at home, you should reduce your energy usage and reuse wherever possible. Some monthly costs are unavoidable, but you could consider a different home insurance provider and get some other quotes before renewing. If the office is nearby, try cycling or public transport rather than using your fuel.
- Save wisely
If you have the luxury of being able to save some money and stay within your budget, it’s worth knowing about the best tactics to make the most of your money.
Look for a savings account with high rates of interest. ISAs offered by banks might even come with joining incentives, so it’s worth doing your research. Bear in mind that you’ll typically get higher interest on accounts without instant-access. Prioritise carefully and try to be realistic: you can choose between funds, stocks and shares, bonds, and more.
- Manage your debts
Lastly, it’s always worth dealing with your debt. Interest rates inevitably increase the amount you need to pay back over time, so you should deal with anything threatening a major cost.
Priority debts are the loans with the highest interest rate. Consolidate your loans if you think it’ll be beneficial, but if you’re not sure where to start, seek professional financial advice as soon as possible.
