Inflation has robbed every household of nearly £5,500
In the two years to March 2023, the UK has lost £153bn to inflation, reducing households’ purchasing power to the tune of £5,455 each.
Within the £153bn figure, investment platform Interactive Investor calculates Brits spent an extra £53bn on soaring energy bills. This means an additional £1,885 per household, on average.
Meanwhile, households have also felt the pressure from rising food prices, with this expenditure rising by £32bn (£1,147 per household).
Inflation in the 12 months to March 2023 eased slightly to 10.1% and many believe it has reached its peak. Even the governor of the Bank of England said there is good reason to expect the figure to fall sharply in the coming months.
Myron Jobson, senior personal finance analyst at Interactive Investor, said: “Prices are no longer rising at the fastest pace in 40 years and inflation is expected to cool further this year – but that doesn’t mean that the cost-of-living burden on personal finances will lift anytime soon.
“When every pound counts, it is important to keep tabs on your spending habits to get a better idea of the goods and services that are eating most into your budget, and where you could cut back as inflation remains stubbornly high and the cost of borrowing rises.”
Jobson lists these five tips to help you navigate the cost-of-living squeeze:
1) Maintain a budget
Budgeting is integral when it comes to keeping your financial house in order. It allows you to plan how much you will spend or save each month as well as track spending habits.
It’s worth keeping a spreadsheet of your own spending habits. There is a plethora of budgeting templates available for free online as well as apps to help you on your way.
Once you have a better idea on how you spend your money, you can explore ways to help you live within your means.
2) Build and maintain a rainy fund
Try and keep a rainy-day fund to tide you over when times are tough financially. A good rule of thumb is three months’ salary, though stretch to six if you can.
3) Save on food bills
Consider buying the own brand equivalent of traditional branded goods to help you cut the cost of groceries.
If you can afford it, buy items in bulk so you are not constantly spending as prices continue to climb. It is also worth taking advantage of supermarket loyalty schemes, such as Tesco Clubcard and Nectar card – which can help you unlock big discounts and other exclusive rewards.
4) Shop around for the best deals
You won’t know whether you are paying over the odds for things unless you shop around for the best deals. For example, if you’ve been with a broadband provider for a while, it is likely that any introductory offers will have expired, and you might be paying more than you need to. The same goes for mobile phone contracts. Check the market to see if you can get a better deal.
5) Ask for help if you’re struggling financially
Don’t suffer in silence and don’t be afraid to ask for support.
The various cost-of-living support schemes are worth up to £900, but if you are struggling, speak to a debt advice charity such as StepChange or Turn2Us so that they can list all your options.