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Coping with the cost of living

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Over the past few months, the rise in the cost of living has dominated news headlines. From food to energy to clothes, prices have shot up and this is putting a strain on all of our wallets. The current inflation rate in the UK is 9%, but it is expected to hit 10% this year, driven by increased prices in everyday goods and services.

Factors contributing to the rise in the cost of living include:

  • Energy bills
  • Fuel prices
  • Food prices
  • Aftermath of Covid-19 impacting supply chains and production of goods, creating shortages
  • The rate of VAT increasing for some businesses to 20% after it was temporarily reduced for hospitality and tourism organisations

Combined with tax increases and a rise in National Insurance contributions, households are having to keep an eye on their spending and adjust their budgets.

As daunting as this can be, we’ve listed a few tips and tricks below on how you can save your pennies and cut back on your spending.

Review your finances

Setting a budget and making a commitment to improving your expenditure can make a world of difference, as spending can often fluctuate. This will give you the opportunity to have more control of your finances.

A good starting point is to check your direct debits and standing orders, as this can help you to spot where any cut-backs can be made. For example, if you’re no longer using a particular subscription then cancelling it will give you a monthly saving straight away.

Next, review your utility bills and other policies as this could lead you to finding a better deal. An alternative broadband provider, for instance, or a cheaper phone deal can make a significant impact on your finances.

Become a savvy shopper and take the time to compare supermarket prices. You could get the same item for a much cheaper price from an alternative store compared with your usual supermarket. And take advantage of the discount offers and reward schemes that are usually on offer as these can save you even more on your everyday items.

If, after you’ve reviewed your finances, you find that you have some cash leftover, you can add this to a high interest savings account. Even a small amount put aside each month could contribute to an emergency fund, a milestone, or a specific savings goal.

Energy efficiency

The biggest contributor to the rise in the cost of living is energy bills and fuel prices, so it may be worth considering switching energy providers.

The Money Saving Expert recommends if you’ve been offered a new fixed rate that’s with an alternative energy provider and it’s no more than 35% to 40% above your current price-capped tariff, you could potentially find a cheaper supplier!

Improving your home’s energy efficiency can also have a positive result on your finances. By making even small changes in your home to help preserve and reduce energy use will help with the cost of your monthly bills.

Psst…have a look at our blog on ways to improve the energy performance in your home for some bonus tips!

Frugal fuel

The cost of petrol and diesel is the highest it’s ever been, so how can you preserve the amount of fuel you use, meaning less trips to the service pumps?

Firstly, reducing the weight in your vehicle (a tidy up and a clear out?), keeping the tyres inflated to the recommended pressure and harking back to our driving lessons days - accelerating gradually and changing up a gear sooner - will all help improve fuel economy.

Depending on where you’re travelling to and what for, taking public transport could be more cost-effective and another way to ensure you’re saving on your fuel. You’re likely to be eligible for travel discounts if you’re aged 16-25, aged 60 or above, in full-time education or dealing with a disability.

These are all small changes, but together they can add up to a significant difference.

Paying off debt

When creating your new budget you should make allowances for paying off any debts that you might have.

Speak to your bank or the finance provider that you owe money to and check if you can adjust your payments to suit your financial situation.

It’s also a good idea to have a look at which debt has the highest interest rate and prioritise paying this off sooner rather than later. The longer you leave a high interest debt the more you will pay in the long run. Alternatively, another option is to move the debt on to a cheaper rate.

If you’ve tried everything to cut back on your spending but you’re still struggling to make ends meet, we’ve listed a few resources to help:

Local foodbank
Stepchange
Citizen Advice
Shelter
Check if your eligible for unclaimed benefits

We recognise that our financial wellbeing can sometimes have an impact on our mental wellbeing. If you have any concerns about your own mental health, then we would recommend you seeking support from a professional organisation. The mental health charity, Mind provides information and advice to anyone experiencing a mental health problem.

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*AER stands for Annual Equivalent Rate and illustrates what the interest rate would be if interest was paid and compounded on an annual basis.

Paragon Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England number 05390593. Registered office 51 Homer Road, Solihull, West Midlands B91 3QJ. Paragon Bank PLC is registered on the Financial Services Register under the firm reference number 604551