How to cope with the increasing costs of living

How to cope with the increasing cost of living

The cost of living has been steadily increasing in recent years, which could have an impact on all of us in the near future. Larry Elliott, the economic Editor for the Guardian, recently wrote that the cost of living is ‘certain to rise noticeably over [the] next 12 months’ and could peak at 3%. Therefore, this means higher prices for consumers’ that will affect everyday expenses.

With this in mind, here’s how to cope with the increasing cost of living, on a day to day basis:

Budget and save

A budget is relatively easy to create but can be tough to stick to straight away. Life always finds a way to encourage more spending but having a budget can ensure the essentials such as bills and food shopping are all covered. Start by taking a close look at your income and expenditure and work out what you have coming in and going out each month. Work out how much you need to put aside for household bills and then highlight any transactions you believe could be eliminated or reduced in expense.

A recommended method for creating a budget is the 50/20/30 philosophy. This means 50% is spent on ‘fixed costs’, so bills and regular repayments, 20% is transferred into a high interest savings account and 30% is considered flexible, to be spent on day to day things such as food and entertainment.

Of course, you can amend this rule to suit your personal situation, for example you may require 60% for fixed expenses, 15% for savings and 25% for everything else. Having a little money put away each month can reduce the risk of falling into debt should a surprise expense crop up in the future while the cost of living has an impact on your finances.

Tackle debts

Debt repayments are an expense that can swallow up a significant amount of your income, so take some time now to tackle your debts head on and cut them down. Whether this means simply upping your repayments to remove them quicker or seeking the advice of a debt management service and taking on a debt solution.

Some debt solutions ask you pay one monthly payment based on what you can afford and then this money will be distributed amongst your creditors. You might be paying lower payments for a potentially longer period but they will help you find your feet if you are struggling to manage your finances

Some of the most common solutions that people choose, include:

  • Repayment Arrangement – this is where you communicate with your creditors yourself and arrange repayments that are more affordable for you. This is dependent on your creditors accepting your proposition – if they think the amount is too low, they might take legal action.
  • Debt management plan – this debt solution sets up an informal agreement between you and your creditors, where you pay a set monthly amount to clear your debts. Interest and charges are not frozen however, and creditors can still make further demands, so be aware of this before choosing this solution.
  • Individual Voluntary Arrangement – a popular insolvency solution, you will find more advice on IVAs here.

Lifestyle changes

Making simple lifestyle changes can have a big impact on your finances. For example,

swapping brands for budget labels in the supermarket, scoping out the best energy provider deal for your gas and electric and haggling with your car insurance to reduce the monthly costs. The money saved from a few small changes can then contribute to that savings account or be used to pay off debts, allowing you to live more comfortably without dipping into your necessary everyday expense amount.

Coping with the increased cost of living simply means being prepared and being aware of how it could affect you, attempt to avoid unnecessary debt in the future by following these simple steps.

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