Cost of Living Crisis in The UK and Our Tips to Save Money!

In recent months, the United Kingdom has faced a formidable cost of living crisis. This predicament has been instigated by the steady escalation of prices of goods and services, surpassing the growth rate in incomes, thus jeopardising the purchasing power and actual incomes of many households, specifically those with fixed and low incomes.

As per the latest data gleaned from the Office for National Statistics (ONS), the annual inflation rate, gauged by the Consumer Prices Index, including owner occupiers' housing costs (CPIH), soared to a staggering 10.1% in January 2023. It is noteworthy, however, that this is a tad lower than the recent zenith of 11.1% witnessed in October 2022. Nevertheless, the fact remains that this rate is still considerably higher than the Bank of England's target of 2%, thus, casting doubt on the UK's macroeconomic stability. The root causes of this inflationary surge are multifaceted and complex and include an upsurge in energy and food prices. These have been primarily influenced by many factors, including the global recovery from the coronavirus (COVID-19) pandemic, snarls in supply chains, labour shortages, and geopolitical tensions.

The ongoing expense of living crisis has been met with a number of measures by the government designed to alleviate the financial burden on households and businesses alike. These measures include the provision of one-off payments to eligible households, the imposition of a £2,500 per year cap on energy prices until March 2023 (and a subsequent £3,000 per year cap until March 2024), the increase of the national living wage and personal tax allowance, as well as the extension of certain benefits and tax credits. However, these measures have been somewhat counteracted by other changes, which have decreased household incomes. Among these changes is the termination of the furlough scheme and universal credit uplift, the augmentation of national insurance contributions and council tax, and the freezing of select benefits and pensions.

The impact of this expense of living crisis has been felt in the consumer sphere, where changes in consumer behaviour and confidence have been observed. For example, while the Office for National Statistics (ONS) reported a 1.2% rise in retail sales volumes in February 2023 compared to January 2023, sales are still 0.8% lower than in February 2020, before the pandemic. Meanwhile, the Bank of England's survey of households has demonstrated a drop in consumer confidence to its lowest level since April 2020 in February 2023, as more individuals anticipate an escalation in inflation and a further deterioration of their financial situation over the next year.

In light of these economic difficulties, individuals must find ways to manage their finances and reduce expenses. Here are a few tips on how to save money and cope with the cost of living crisis across three key areas: energy bills, food and groceries, and transport and travel. Furthermore, we will advise on how to manage your budget and plan for the future effectively.

How to save money on energy bills?

Many households often find themselves burdened with significant expenses in the form of energy bills, especially during the harsh winter months. Fortunately, there exists a myriad of measures that can be undertaken to alleviate this issue. One such measure, which is relatively simple in nature, is to turn down the thermostat by a mere one degree. The ramifications of this slight reduction can be quite substantial, resulting in savings of up to a whopping £80 annually. Additionally, investing in energy-efficient appliances and light bulbs can significantly reduce electricity usage and increase lifespan. Moreover, a critical method to keep homes warm and minimise energy consumption is through the implementation of proper insulation. Through the insulation of lofts, walls, windows, doors, and pipes, households can effectively prevent heat loss and mitigate draughts, resulting in savings of no less than £150 a year on energy bills.

How to hold back cash on food and groceries?

The surging food prices owing to inflation and supply chain constraints have resulted in it being a colossal expense for numerous households. Nonetheless, there exist several means to curtail food expenditure and wastage, all while ensuring that quality and nutrition are not sacrificed. Pre-planning meals, crafting a shopping list, vigilantly seeking discounts, and juxtaposing prices at different stores are all instrumental in economising. Moreover, opting for own-brand or value products, procuring in bulk, curbing food waste via proper storage, checking use-by dates, innovatively using leftovers, freezing, and composting can also foster frugality. In addition, the benevolent gesture of donating excess food to food banks or charities can help minimise wastage while benefiting others.

How to save money on transport and travel?

The frugal and health-conscious option of walking or cycling presents itself as a viable solution, ultimately reducing fuel costs and carbon footprint. Apps or websites can lend a hand in charting the optimal routes and identifying the shortest, safest paths. Also, the Cycle to Work scheme facilitates up to 40% off bike expenses, which is a fantastic offer. Moreover, trawling for discounts and offers on the train, tram, or bus tickets is a viable tactic, including the utilisation of travel cards or railcards. For part-time commuters, the Flexi train tickets, permitting travel for eight days in a 28-day period, would serve as an excellent option.

Furthermore, pre-booking train tickets generally tends to be more budget-friendly, and "splitting" a train journey into separate tickets for various parts of the trip can result in significant savings. Finally, car-sharing schemes can help reduce fuel and parking expenses, as well as alleviate congestion and pollution. Several apps or websites can help find car-sharing partners or existing carpools, providing an additional opportunity to save.

Summary

This informative article elucidates practical and beneficial recommendations for navigating the UK's tumultuous cost of living crisis. It concentrates on three key domains: energy bills, food and groceries, and transport and travel. Adhering to these expert suggestions not only curbs expenditure but also ameliorates wastage and fosters a healthful lifestyle. Remember that economising is not simply about curtailing expenses but also regulating your finances and devising a blueprint for the future. Vigilantly monitoring your income and expenses, formulating attainable objectives, and regularly saving for emergencies and long-term objectives can facilitate the process. If you encounter challenges of indebtedness or financial hardship, do not hesitate to seek professional guidance, as many resources are available to offer you support.