What Should You Be Doing Amid the Cost of Living Crisis?
There is an ongoing cost of living crisis in the UK, meaning a decrease in “real” disposable income. The problem began in late 2021, with the COVID-19 pandemic partly to blame for high inflation that outstrips wages and benefits.
The pandemic has had a severe impact on some products, and the supply chain and businesses that barely made it through the lockdown are now struggling to repay the COVID-19 bounce-back loan.
Renewed coronavirus lockdowns in China have not improved the situation. The prices of goods will continue to increase. The case now isn’t so much about budgeting but surviving.
Many Factors Come into Play
In addition to the pandemic’s impact and contribution to the high cost of living, rising taxes, debt, the energy price cap lift, and the Russia-Ukraine war are also to blame.
Many international corporations have halted operations permanently due to reputational risk or compliance with economic sanctions. The inflation rate in April hit its highest since 1982, primarily because of the soaring energy prices courtesy of the war.
Energy giants BP and Shell boast huge profits as oil and gas prices continue to surge across the UK. Critics have reached out to the government, demanding that it imposes an emergency windfall tax on the profits. The move will subsidise the rising costs that many people continue to face but the risk is that it reduces investment by these companies.
The government hasn’t responded to these demands, fearing that corporations will refuse to invest in domestic energy sources. Sky-high oil and gas prices are generating mega-profits for the corporations but causing the cost of living to soar for people facing high energy bills.
How Will Inflation Change in the Coming Months?
The Bank of England forecasts that inflation will reach its peak at 10.2% by the fourth quarter. The factor behind the increase will be the 54% increase in the energy price cap from April 1 with a further increase now planned for October. There’s also a forecast for a further 40% increase in October. Inflation will remain high for the next two years but will not reach its 2% target until Q3 of 2024.
As inflation rises, mortgage and rent prices have increased by 11% year-over-year. The average single earner will still lose 37% of their salary to rent alone. The impact is also evident in student loan repayments, increased food prices, rising energy costs, and more expensive housing.
Tips to Enable You to Weather the Crisis
It’s not unusual for people to seek advice on surviving these harsh economic times. Financial advisers recommend the following:
- Providing monthly energy readings to reduce the amount payable instead of using the supplier’s estimate.
- Claiming back cash whenever you suspect an overcharge. Select council taxpayers may receive a £150 refund for their energy expenses.
- Finding a way around all outstanding debts, as debt can be stressful in challenging economic times. Establish how much you owe and create a favourable repayment plan with your creditors
- Tackling any outstanding bills and debt disputes. You can reach out to the Ombudsman service or Citizen’s Advice if you have a reason to believe creditors are treating you unfairly.
- Balancing your transfer cards to reduce your reliance on credit cards for payment. Transfer cards can reduce the interest expenditures on numerous cards, reducing your monthly expenses.
Reach Out to a Financial Expert
The cost of living crisis will be here for a while, and it’s sensible to brace yourself for what’s coming. The above tips can help, but that’s not all there is to get through this period.
It would be in your best interest to contact a financial planner to assist you in making the best use of your investments and protect your savings. Contact Claire at firstname.lastname@example.org to schedule a financial management consultation session.
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