An unfortunate conflation of different events means that it’s very likely that you’ll face an increase to your cost of living during the 2022/23 tax year.
These include:
- Inflation is rising and is set to go higher still
- The increasing cost of oil has pushed the price of a litre of petrol towards £2
- The energy regulator, Ofgem, have announced household energy bills are to go up by an average of 54% in April 2022
- National Insurance contributions (NICs) are going up by 1.25 percentage points from April 2022.
Read about eight practical and straightforward ways you can manage your finances to help you cope with the rising cost of living.
1. Have a clear idea of your financial position
A good first step to help you manage your day-to-day finances is to know exactly how much you’re spending, and what on.
After all, if you know what you’re spending, it’s easier to make plans to reduce your expenditure. Having a clear picture of your finances will help you understand how much money you have to work with each month.
If you haven’t done so already, set up a simple spreadsheet that outlines your regular non-discretionary outgoings. The easiest way to do this is to list your monthly direct debits and standing orders.
This will immediately give you an idea of where you can save money each month. Do you still make use of that gym membership? Do you really need Netflix, Amazon Prime and BritBox?
Cancelling direct debits you no longer need is one of the quickest ways of saving money and you’ll see the benefit within the space of a month.
2. Review your discretionary spending
The next step is to go through recent bank statements to check on your discretionary spending – how you choose to spend your money each month.
It might help if you list this under different headings such as:
- Travel costs
- Household shopping
- Eating out
Once you have this information set out in front of you, then you can move forward and look to make savings.
3. Check your investment strategy is still appropriate
Rising inflation can eat away at the purchasing power of your pension fund and other savings.
It’s only an immediate issue if you need to withdraw money straight away, but there are some potential steps you can take that could help protect the value of your fund.
For longer-term investments, such as your pension fund, it may well be worth reviewing your investment strategy to ensure it’s still appropriate. We’d always recommend you speak to your financial adviser about this.
4. Check your savings
When it comes to your short-term savings, which is likely to be your emergency fund in an easy access savings account, shopping around for the best interest rate is advisable.
Thinking strategically can help your money work harder and offset some of the impact of rising prices – even if you’re unlikely to find a savings rate that will match the current rate of inflation.
You should always be on the look-out for short-term savings offers and be prepared to move your money if it’s clear you’ll get a better rate.
5. Find out if you’re paying too much tax
One simple process that could potentially reduce your monthly outgoings is to check your tax code is correct and that you are paying the right amount of tax.
You can do this via the government website or by speaking directly to HMRC.
6. Plan ahead for key events
Planning ahead can help you manage your money more effectively and make savings when it comes to your regular outgoings.
It’s much easier to manage your finances if you know how much you’re spending under certain headings at the outset, and so can plan accordingly to stay within your budget.
You’ll also find it easier to plan for high-cost events such as holidays or buying a new car if you’re saving in advance rather than looking to meet the cost with credit card borrowing or a personal loan.
7. Don’t ignore insurance renewal notices
Insurance can be a competitive market for consumers.
This means that for ordinary domestic insurance policies such as household, property and motor insurance it’s always worth shopping around for a cheaper price when you get your annual renewal notices and not assume that the renewal rate you’re being offered is the best you’ll get.
Price comparison websites are user-friendly and can often help you find a much cheaper price for the same level of cover.
8. Energy bills
As energy bills go up, the number of fixed-rate deals available is reducing and, with many gas and electricity suppliers, disappearing totally.
The only way to reduce your monthly cost is to reduce your consumption.
Many consumer groups, such as the Energy Saving Trust have set out the best ways to lower the amount of gas and electricity you use on a daily basis.
Two tips we’d suggest are:
- Ensure your whole household know how important it is to take steps to save energy.
- Take regular meter readings so you can monitor your usage and to ensure your energy provider is actually charging you for what you’ve used rather than estimating your bill.
Get in touch
If you need any advice regarding your financial planning, please get in touch with us.
