By David Lamb CFP™ MCSI
With inflation at its highest level in 40 years, how can you formulate an action plan to manage the resulting cost of living crisis?
The first thing to do is not to panic!
The second thing is to complete a detailed budget analysis. This will help you plan how much you can spend each month and help identify areas where savings can be made.
This analysis will only work if you are honest about your income and expenses; it must be detailed and accurate.
Refer to bank statements, investment statement, P60s or pay slips, credit card bills and recent utility bills.
Look at your expenditure and identify where you can make savings.
Never has the saying ‘look after the pennies and the pounds will look after themselves’ been so important.
The UK Parenting Forum shared some practical tips for looking after the all-important pennies, including:
- Showering at the gym, not waiting until you get home. This is, of course assuming you use your gym membership. Research has shown that 77% of UK adults who sign up for gym membership then fail to attend regularly, wasting an average of £303 per year.
- Buy porridge in bulk instead of expensive children’s cereals
- Consider charging phones and battery packs at work (with employers’ permission, obviously).
- Paying for insurance monthly incurs interest. Consider paying for this on a 0% purchase credit card, then pay off monthly. Discipline is required.
- Cut dishwasher tablets in half.
- Use washing powder not liquid and use half the recommended amount unless the clothes are really dirty (powder is cheaper than liquid anyway). Don’t bother with fabric conditioner as you will not really notice the difference.
- Dried beans and pulses are really economical and could replace the Friday night curry (you have stopped your takeaways haven’t you?)
- Check the price of fruit and veg price/kg. Often the smaller bags are cheaper.
- Bagged fruit and veg is often cheaper than loose.
- Plan meals, and shop only one each week, but plan for eight days. On day eight use up all the odd bits and pieces in the fridge. This will result in you shopping for 46 weeks of the year and gain six weeks’ extra housekeeping money.
- Turning off electrical devices, instead of leaving them on stand-by. It has been estimated* that the average UK household wastes £147 each year by having devices on stand-by for example:
- Television £24.61 pa
- Set top box £23.10
- Games console £12.17
- Microwave oven £16.37
- Shower £9.80
- Washing machine £4.73
- Printer £3.81 (I’ve just switched mine off!)
- Phone charger £1.25.
* Source: British Gas
All very helpful, but this will give you the biggest saving: most houses are heated between 18°C and 21°C. According to the energy supplier Utilita, just reducing the temperature by 1°C could save as much as £321 a year. Just wear a thick jumper and you’ll not notice the temperature, but you will notice the savings!
You can use our Truth about Money calculator to help you with your expenditure calculations and build finance projections at:
