This is a guest post written by Financielle, for content pitches please email [email protected]
Unless you’ve been living under a rock, you will have seen the headlines about the cost of living crisis, but what can we actually do about it?
When things become overwhelming and you don’t feel like you have much control, it’s easy to carry on as you are. When it comes to our money, there are some simple strategies we can put in place that can help us take back some control.
What is the cost of living crisis?
In its simplest form, the cost of living crisis refers to the fall in real disposable income, meaning our outgoings are increasing but our wages and benefits are not – or at least not at the same rate. This has been made worse by recent tax increases too.
We have seen increases in the cost of energy, the food shop and fuel – with prices rising faster than they have done for 40 years and the Bank of England predicting energy prices especially will drive inflation to 13%.
The price increases are impacting items we need every day. If you do a food shop, drive a car or pay energy bills, you may have noticed an increase in these costs over the last couple of months and it’s not going to stop anytime soon.
How will it affect me?
Whilst everyone will struggle during the cost of living crisis, it’s important to call out a number of ways that women will be hitting harder than men.
Women are often the shock absorbers of these rising prices, as they are more likely to manage the budget, do the food shop and even pay the household bills. Women are having to make decisions between what food the household can afford to buy, whilst making sure there is enough money to put fuel in the car and pay the heating bill.
This is all whilst being heavily targeted to part with their hard-earned cash by consumer brands. Society expects us to be beautified, dressed in the latest trends and fuzz free and all of this comes at a cost – especially when you factor in the pink tax.
This is on top of the already-unjust financial gaps, such as the gender pay gap, where women were paid just 90p for £1 earned by men and the gender pension gap, where women can expect to have over £100k less in their pension pots compared to men at the time of retirement.
During the cost of living crisis, if you are pregnant or looking to have a baby soon, you won’t receive an increase in SMP (statutory maternity pay) which stands at a measly £156.66 a week and if you are a single parent you won’t receive an increase in child maintenance payments, even though household outgoings will increase.
This is all very much doom and gloom and there are lots of elements outside of our personal control. You can, however, focus on the things you can control and we’ve created a helpful list for you:
1. Know Your Numbers – the first budget!
You have to pay attention to even the most basic of numbers – we need to work out where you’re at right now. Set time aside to create a budget: you’re going to need four categories: Income, Fixed Expenses, Sinking Funds and Flexible Expenses.
Income: all income coming into the household
Fixed expenses: all fixed costs – usually your automatic bank payments – such as bills and subscriptions
Sinking Funds: A pot of money you build up for expected expenses, such as MOT, car insurance, travel or home repairs
Flexible expenses: all flexible or variable costs, such as food, groceries, fuel or gifts.
Use your banking apps and statements, collect all your logins and financial paperwork and try to do a first “as is budget”, filling the categories with the amounts you estimate that you spend right now.
You could use the Financial App budget planner to do your first budget – otherwise, a piece of paper will do.
2. Squeeze the budget
Now, we’re going to try and squeeze the budget. What can you cut from your budget to make the budget at least balance ie hit zero? This means cutting out any unnecessary costs such as subscriptions you don’t desperately need negotiating and better deals on things like your broadband or car insurance – optimizing the expenses you have.
We need innovative and imaginative solutions here – sometimes it’s not as simple as cutting Netflix and that being enough. It could be changing up hobbies, lengthening the time between beauty appointments or sharing entertainment accounts with friends or family.
Take our free Money MOT in the Learn section of the Financielle App for tips on how to squeeze your budget.
3. Focus on food and drink
For many of us, food is our love language and spending money on food brings us joy, whether that be foodie meals out, weekend drinks or new recipes we want to try out at home.
We’re not here to tell you that cutting back on iced lattes or avocado on toast will help you ride the storm, but there are ways to squeeze this expense without feeling like you’re missing out on your joy:
- Be Supermarket Savvy: If you’re guilty of nipping into Tesco Express and Waitrose Mini to do your grocery shopping, it’s time to get supermarket savvy. Convenience stores like this charge a premium because they are there to serve you when you’re at your most vulnerable. How many times have you gone in for milk and come out with a basket of snacks, a plant and some Ben and Jerrys? Head to the larger supermarkets like Aldi, Lidl and Tesco to get more bang for your buck.
- Create a food budget: When doing your weekly shop do you get to the checkout and hope there’s enough to cover it? We’ve all been there praying the payment gets approved but what if there was another way? Sitting down at the start of every month to determine how much you would like to spend on your grocery shopping will help you stay on track.
- Meal Planning is key: If you head to a supermarket in the hope of finding meal inspiration, think again. You’re setting yourself up for failure and the potential to be distracted by whatever the supermarket wants to flog you from the middle aisle. Set some time aside to sit down and make a meal plan ahead of your weekly grocery shop. Top tip: Having your weekly meal plan stuck up on the fridge for you to see will help you stay on track.
- Meal prepping: Producing meals in bulk is a popular way of cutting down food spend and reducing food waste. This can mean repetitive meals in the week, but if you’re looking to cut down on your expenses this could be for you! TikTok and Instagram have thousands of ‘how to’ videos and weekly meal prep inspiration. Top tip: Shop your cupboards first, it’s likely you’ll have store cupboard essentials like pasta, rice, pesto and some frozen vegetables lurking in the freezer. Some people keep a “stocktake” of what they have in the cupboard so they never buy too much.
- Ditch the mid-week Deliveroo: Do you remember when takeaways were a treat reserved for special occasions or a truly hideous hangover? Now, thanks to the likes of UberEats and Deliveroo, regular meal delivery has become the norm for many. Why not see if you can ditch the deliveries that are convenient over treats? Top tip: Ring fence some money in your budget for a takeaway, you’re more likely to not overspend and relish the treat you’ve been waiting for!
- Grab a bargain – save the planet: Apps like Olio and Toogoodtogo can help you bag a bargain from your local community or popular high street eateries like Greggs and Costa. Using these apps can help you kill two birds with one stone – securing bargains and helping reduce food waste.
4. Don’t ignore the energy price increases
We’ve never had to experience energy price rises like these – but they are here and they are not going away anytime soon. If you can at least face the issue head on and control what you can control, you will be in a much better position than if you pretended it wasn’t happening.
Things are changing by the day, but you can find an up to date summary in the Financielle Apptalking you through what the energy price cap is, helping you decide whether to fix or remain on the variable and sharing what help there is out there if you’re struggling to pay energy bills.
Top tip: Look ahead at your winter budgets and consider putting extra money aside (if you can) into an emergency energy sinking fund, especially if you decide not to fix and instead stay on a variable tariff.
Feeling a little better?
We accept the cost of living crisis is a fairly bleak topic. It’s time to take a breath, reflect on what’s happening and make a plan of action. It doesn’t have to be a big dramatic overhaul of your life, but creating a plan will give you a sense of control over the situation we’re all facing.
If you haven’t created a budget before and are feeling a little overwhelmed, you can download the Financielle app and learn how to create your first one.