The Consumer Prices Index (CPI) rose by 10.1% in the 12 months to July 2022, up from 9.4% in June. This move into double-digits marks a grim new benchmark for the cost of living crisis.
ONS data reveals that a staggering 89% of UK adults reported a rise in their living costs in the same month, up from 62% in November 2021. As a result, three quarters of Brits admit to being worried about the rising cost of living, and almost half find energy bills difficult to afford.
But what does inflation mean for people’s everyday lives, from their commute to their housing and their regular bills? What can they do to get by?
Experts say you can save hundreds or even thousands of pounds with steps such as checking your insurance and credit card payments. And you can take action today to protect yourself from higher energy bills coming this autumn and winter.
Kevin Pratt, household money expert at Forbes Advisor, said: “Official data has confirmed what we are all feeling day in and day out; when we heat our homes or buy groceries, prices are going up - fast - and our money isn’t going as far as it used to. While the government, regulators and suppliers of essential services must take more large-scale action to help hard-pressed households, there are still steps people can take to exercise a degree of control over their household economy.
Energy - savings: variable. Cost control is the goal
“Gone are the days - for now - when a switch to a new fixed-term deal could save you hundreds of pounds a year on gas and electricity. But the summer can be the ideal time to get your energy bills winter-ready.
“If you pay by monthly direct debit and your energy account is in the red, and you can afford it, then now’s the opportune moment to pay that off and approach autumn with as small a balance as possible. Alternatively, consider voluntarily increasing your monthly direct debit now. This can help repay your balance over a longer period and reduce the impact of any future rises.
“On the other hand, if you are in the fortunate position of being in credit, and you can manage without it, then avoid requesting this to be paid back to you. That money you are owed can provide a welcome buffer when your energy usage increases in the months ahead. And if that helps you avoid going into the red with your supplier, it may even mean that you don’t have your monthly payments increased unexpectedly.
“As things stand, typical energy bills are slated to increase from below £2,000 a year to over £3,500 in October, so any action that can reduce the pain of the hike is worthwhile.”
Insurance - savings: £450+ per year
“Insurance is one of those things that you buy and never want to use, but you’ll always be glad to have it if the need arises. So, cancelling cover to save money is rarely a financially-sound move. But, you can still get all the cover you need for a lower price, especially if it's been a while since you last shopped around.
“For example, if your car insurance is due for renewal - something that peaks in September, with new vehicle registrations - you could save up to £319 by switching to a new insurer.
“It’s not uncommon to save up to £146 by switching home insurance. And while you’re shopping around, look to see if your home insurance policy comes with extras - such as home emergency cover, or insurance for belongings away from your home, including gadgets and bicycles - because if that cover meets your needs, you could save money by cancelling any separate, standalone policies you have in place for those.”
Credit cards - savings: variable, depending on APR, but could be thousands
“While it’s wise to avoid or delay any non-essential purchases where possible, rather than turn to credit to fund them, if you already have a balance on a credit card that is charging you interest, then a switch could save you a lot of money and reduce your monthly repayments.
“For example, if you owe £5,000 on a credit card with an APR of 20%, and you are making minimum monthly repayments of £250, it would take you two full years to pay the balance off and you’d actually end up repaying £6,134. However, if you switched to a 0% balance transfer card for the same period - and there are even cards that offer 0% for up to 34 months at the moment - you could pay the same amount per month but save £1,134 in interest.
“Bear in mind, though, that you’d usually have to pay an upfront ‘transfer fee’, typically of around 2.5%. So, in the example above, that would be £125, which is still a huge saving compared to the interest you would pay by staying put.
“Use an eligibility checker when looking for a new credit card, however, as there’s little use applying for a card you are unlikely to get as doing so will affect your credit score. An eligibility checker will tell you which cards you are most likely to get, and using one won’t affect your credit rating.
“If you have no choice but to use a credit card to fund purchases, then look for one that offers a good 0% interest period on new spending, and put together a plan to clear the balance before this introductory offer ends - or sooner, if possible.”
Current accounts - savings: variable, but a declutter can save hundreds of pounds
“Most of us have subscriptions or memberships that we don’t use as much as we should, if at all. From time to time it’s a good idea to go through your direct debits and standing orders to uncover any costs that you are forking out unnecessarily, and cancel them. If you eventually change your mind you can always sign back up, after all.”
Benefits - if you need them, use them
“If you’ve cut your outgoings as much as possible but are still struggling, then check that you aren’t missing out on any income-related benefits or grants. This doesn't have to be a long or laborious task, and with a few details about your household income it’s easy to find out what you could be entitled to with a government-approved benefits and grants calculator such as Turn2Us.org.
“For example, if you are working, have a child aged between three and four, and are entitled to it, make sure you are collecting the Government’s 30 hours of free childcare.
“Likewise, it’s worth seeing if you qualify for the Household Support Fund. Available through local councils, it’s designed to offer financial assistance to help towards essentials such as food, clothes and utilities. And the Government doubled its funding for this from £500 million to £1 billion from April this year.”
