It’s easy to look at the news in the UK right now and worry about what this means for your finances. Inflation, energy rises, fuel prices and mismanaged higher taxes are all causing a great deal of concern about the rising cost of living in the country.
So, what can you do moving forward to manage this difficult period and protect your finances? If you’re worried about the rising cost of living in the UK and are looking to make some changes to your spending habits, then here are some tips on best budget practice for Winter 2021.
BEST BUDGET PRACTICE
First things first, you should consider creating a detailed, meticulous household budget. Creating a budget will help you to feel in control of your finances and go some way to reducing stress during this uncertain time.
It will also help you to identify every incoming and outgoing, which can then be analysed to see if you can make smart savings, savvy replacements, or cut the expense out entirely (more of that in a moment).
Making a budget can be as simple as gathering all of your bank statements and creating a two-column excel spreadsheet (incomings and outgoings), or something more extensive; check out Which Money’s guide to the best personal finance software here for a rundown of platforms that might suit you.
COST CUTTING
Within that budget appraisal that you’ve just conducted so thoroughly, you may have identified areas of household spending that feel excessive, frivolous or that could potentially be removed entirely.
Go through each of your regular expenses to see if you could be making savings; you’ll be surprised by how many might be lurking in the lower reaches of your bank statements. Even a small change could make a big difference in the long run, so do not skip over any expense. A few ideas for ways to cut costs include:
- Shopping at cheaper supermarkets
- Buying non-brand products
- Cancelling non-essential subscriptions and memberships
- Driving less
- Hosting (or better still, attending!) dinner parties instead of going out to eat
- Switching insurance providers, phone networks, bank accounts
On a more micro level, cutting a single expense each week can help you save money in the long run. One week, it could be your Wednesday espresso in the local cafe, the next, your Friday night takeaway or even that second bottle of wine you buy to finish off your Sunday roast…it can all make one massive difference when considered cumulatively.
HOLD OFF ON BIG PURCHASES
If you are planning any big-ticket purchases, you may want to put these on the back burner for a while if possible, at least until the much trailed ‘bleak winter’ is dispensed with. It’s not a good idea to eat into savings or take on debt when the cost of living is rising, so holding off on large purchases and building your savings is the smart move here.
BOOST YOUR SAVINGS TO MITIGATE THE COST OF EMERGENCIES
Following this, you should look to boost your savings while the cost of living is rising. Building an emergency fund is essential at times like these, so that an unexpected cost like needing new tyres for your car or investing in a new boiler won’t throw you off course financially and land you in debt.
You should have an emergency fund somewhere that is easy to access, and then look to grow savings through investments (such as an S&S ISA), premium bonds or high-interest accounts. Interest rates are currently low, but if you are willing to lock your money away for a year or two then you could find a good rate.
LOWER ENERGY USAGE
With energy bills skyrocketing, now is also a good time to reduce your usage (which will also help to reduce your environmental impact). Using a smart thermostat, lowering the temperature, washing clothes on cold and taking shorter showers are a few ways to reduce your energy bills each month.
SET MINI TARGETS
Some financial goals will take longer to achieve than others; that’s the nature of life and the oppressive economic system we live under. If you’re saving up to purchase a property or host a wedding, for example, it might take years before you reach your ultimate objective. It’s natural for your motivation to wane over time – and for your spending to oscillate between thrifty and frivolous in between – but setting mini targets will help you to keep on track.
Every time you hit a new target, give yourself a small reward; in doing so, you’ll have a regular incentive to work towards it. You don’t need to blow your budget in order to do this but be sure to recognise the hard work you’re putting in and reward yourself accordingly.
Many people swear by a simplified, monthly 10% savings rate as a general ballpark figure to aim for. You can set up a monthly direct debit from your primary bank account into a savings app, or take advantage of one of the many savings apps currently out there which can automate this process further for you.
Hopefully, this post will give you a few ideas and alleviate some of the stress that you might be feeling. It is certainly a worrying time for households, but there are always steps that you can take to give yourself some breathing room and protect your finances against the rising cost of living.
*Anything written by IDEAL Magazine is not intended to constitute financial advice. Always consult with an independent financial advisor or expert before making an investment or any personal finance decisions.*