Consumers across the UK are likely to start filling a pinch as their budgets tighten due to the cost of living crisis, as inflation rates increase to over 8%, almost 7 % more than what they were just a year ago. Additionally, cost of utilities such as electricity, gas and oil have seen the biggest increase, with some UK households having to spend thousands of pounds more than they did the year prior.
What doesn’t help, is the more laid-back relationship with money many of us have developed over the course of the Coronavirus pandemic. With restrictions on travel, and almost no access to live entertainment, the average UK citizen had managed to save up to £617 a month. The stark contrast between the lower outgoings many of experienced just a year ago, followed by the rising prices we are facing now, have left many in a frenzy on financial anxiety as we struggle to readjust our budgets and adapt to this new way of living.
Our newly found freedom to socialise and spend our free time as we please makes budgeting even harder, as saying no to a family holiday or dinners out is harder now after anticipating the return to normalcy for so long. It’s important to remember however, that there is a way out of everything, and as much as the continuous economic changes over the past few years can leave us exhausted, we are gaining an additional level of resilience as we go through this together.
As much as having to change your financial habits and squeezing the belt on your budget can appear scary, it becomes increasingly easier with time, and you may be surprised at the amount of things you are overpaying on now that can actually be slashed in price. Inflation, is temporary, whilst good financial habits will stick with you for life, helping you capitalise on your financial highs, and keeping you going through any financial lows.
We explore the main areas that can help you save, budget, and earn extra income below.
Reducing your costs in the right areas
This may seem blatantly obvious, but one of the first and most important things you may need to do when trying to improve your budgeting efforts is look at the main areas where you can cut existing costs. The important thing here is consistency, over quantity. Many people who are keen to jump onto their budgeting journey may apply a somewhat extreme approach at the very start, as they are eager to watch their savings grow.
This does not always have to be necessary, and oftentimes, individuals who do so may find that the budgeting fatigue or trying to cut costs in the wrong areas may actually lead to a level of frustration, causing unexpected spending sprees just to try to make themselves feel better.
Instead of cutting your budget in half and making huge lifestyle adaptation, start by taking a look at your bank statement, and analyse these key areas quick savings:
Statistics show that almost 81% of UK households are signed up to at least one subscription service. Most commonly this includes Netflix, or other streaming services, but oftentimes these can be automatically rolling subscriptions that we may have forgotten to cancel after a free trial. Doing a quick scan through your bank statement can help you identify which subscriptions you may be paying for that you no longer need.
Bills past their promotional term
Plenty of companies tempt customers with special offers for a limited time only. This is particularly common with internet and phone deals, where you may only be required to pay half price for a certain amount of time. You may be surprised that you are not always committed to pay the full price past your promotional term. This applies especially to broadband deals, where you can switch providers after your promotional offer ends to avoid paying the full price and continue saving.
When looking through your bank statements it’s worth going through the process of seeing how much money you spend on ‘convenience buys’ every month. These are things that you buy ‘on the whim’, such as takeaway coffee, traybakes, or food on the go, which you could easily avoid. The average person in the UK is said to spend over £300 on takeaway coffee, every month. This does not include the extra traybake, packet of crisps or sandwich you are likely to buy with it.
Credit card interest
If you’re currently paying interest on your credit card, it might be worth checking if you’re eligible for a credit transfer to another provider. Credit transfer cards usually offer interest free periods ranging from 6 months to even up to 24 months. Based on UK data interest on an average credit card is around 25%. You can save substantial amounts of money by transferring your debt to a different provider and increasing the duration of your interest free period.
Bringing down the cost of your household bills
The majority of our paycheck month to month is dedicated to paying our household bills. These bills, which include things such as electric, heating, rent, or mortgage repayments, are usually hard to reduce, particularly now as they have been consistently increasing in price.
As much as there is little to no leverage in the initial amount that you are getting charged, you can take a couple of steps that will make your home more efficient and provide you with long term savings.
- Ditch the tumble dryer - We all love the comfort of having fresh dry clothes within an hour, however, tumble dryers are one of the least energy efficient devices out there. By switching over to a traditional drying rack, and putting your clothes through an extra spin cycle to get rid of excess water, you’re likely to see a reduction in your energy bill.
- Use your dishwasher sparingly - wet appliances, such as washing machines and dishwashers account for roughly 14% of a typical energy bill. Consider washing your dishes by hand, or alternatively make sure you fill your dishwasher up to the brim before turning it on.
- Invest in energy efficient appliances - If your home appliances could do with an update, make sure to only purchase ones rated A++ to keep your home as energy efficient as possible for the years to come.
- Use LED or energy efficient light bulbs - This one is a no brainer. LED lighting can use up to 75% less energy, making this a very easy and economical way of reducing your energy bills.
- Pay attention to your fridge - You can save energy by setting your fridge to anywhere between 3 and 5 degrees, as well as defrosting it regularly. Extra ice within the freezer can drive the freezer to work harder, increasing it’s energy consumption.
- Turn off the lights - As simple as it sounds, many of us get used to the comfort to switching on all the lights as we make our way through the house. Being extra vigilant, and avoiding having multiple lights on in one room, as well as switching lights off as we leave a room can do wonders for our energy bill.
We can expect our heating bills to be substantially higher than last year, particularly over the winter months. Heating costs are one of the hardest to reduce as many of us love having a warm and cosy home, and as the winter temperatures creep up on us, we’re left with no other options but increasing our gas / oil use to keep it that way.
There are, however, small steps we can take to avoid our heating bills skyrocketing, whilst still keeping it at an optimal temperature.
- Improve the insulation across your home - As much as this is neither a quick, or cheap fix, it is definitely the most effective. It is estimated that the average homeowner can save up to 15% on their heating bills by making sure their roof and basement is effectively insulated. Adding additional forms of insulation such as cavity wall insulation, can help you retain heat even more and is fairly affordable and quick to do.
- Close off unused rooms - Got an extra room dedicated to storage, office space, or a guest room? Consider turning off the radiators in spaces you do not use regularly to bring down the price of your heating bills.
- Keep your heating habits under control - Try to fight the urge to switch your heating on excessively, and aim to keep your home at a comfortable temperature between 20 and 22 degrees celsius. During the colder months, you may find yourself longing for that extra bit of heat when you return home, but switching your heating on excessively is guaranteed to bring up your heatings costs. Keep your home comfortable, and equip yourself in some warm jumpers for the transition phase.
- Invest in some insulated curtains - Around 18% of heat in the house is lost through windows. Investing in extra thick, insulated curtains can bring this number down significantly and makes for an easy and long lasting way keeping your costs down.
- Check for drafts - There are plenty of ways cold air can get into your home, with the most common areas being windows, doors, and letterboxes. Do a quick check around the house and make sure all of these are draft proof and well sealed to avoid your house from quickly loosing it’s heat.
Bumping up your budget through additional forms of income
If you feel like you are already living within your means, do not overspend and stick to a tight budget or perhaps just really value and enjoy the things you devote your disposable income to, your best bet to save and watch your savings grow may be to look at additional sources of income.
An obvious thing for those who want to save substantial amounts, would be to get a second job. This can be a somewhat extreme way of increasing your income in order to deal with the cost of living crisis, and for many, also highly undesirable. If you are looking to just somewhat increase your budget, or make an extra couple of pennies to stash away into savings each month, there are ways you can earn extra money with a little bit of creativity and determination.
There are many ways we can capitalise on the things we already have, whether it’s through selling things we may no longer need, making a hobby into a job, renting out a spare space or looking into the numerous ways to make an extra income online. We have explored some of the easiest ones below:
- Put a spare room up on airbnb - If you live in a desirable location, close to tourist hotspots or city centre, renting out a well furnished and comfortable room within your home can help you make up to £50 a night. Bonus points if you’re renting something beyond the main walls of your property, such as a spruced up guesthouse, or even a glamping tent, you’re in for a big win.
- Turn your hobby into income - There are endless ways you can capitalise on your hobbies. If you enjoy arts and crafts, try selling some of your projects online or at craft fairs. If you are particularly talented at music, try creating a set of tutorials which you can then sell as an online course. Alternatively, consider posting on platforms such as youtube, which can bring endless returns for those that stay committed.
- Freelance - Do you work in an industry where you can use your skills on freelance basis? Careers in Marketing, Design, Finance, or Web development are particularly flexible when it comes to part time, freelance contracts.
- Tutor online - There are plenty of online platforms where you can become a tutor, either in an area of your expertise or more commonly an english tutor for foreign language speakers. These opportunities are often flexible, part time, and offer a good hourly wage.
Remember, whatever approach you take towards saving in order to help with the growing cost of goods and services, you will find that a reliable and easy to follow budgeting tool will help you bring all of your efforts together. There are now plenty of digital apps that connect to your online banking to help you manage your finances, such as plum or mint.
Alternatively, never shy away from good old spreadsheet budgeting. Google sheets offers many well designed, simple to use templates that will allow you to view and manage your finances at a glance.