UK Cost of Living = Surviving!

Cost of living

UK Cost of Living Surviving!

Runaway price increases have caused chaos throughout the UK’s usually robust household finances. According to the most recent HL (Hargreaves Lansdown) Savings and Resilience Barometer, 2 out of 5 people had to use their savings, make financial sacrifices, or borrow money in the last three months to pay their bills. And the going is just going to get tougher.

The root of the issue is inflation. After accounting for the price increases, disposable incomes decreased by 3% during the preceding three months, which had an adverse effect on every aspect of our finances. The Barometer was created in collaboration with Oxford Economics, which predicts wages and even took into account the government’s upcoming lump-sum payments. They found that rather than the additional funds from the government undoing the harm, incomes will remain largely flat for the remainder of the year.

It implies that we will continue to deplete our money and accumulate debt. The cost-of-living crises will wipe out whatever additional reserves we have managed to build.

Lower incomes hit the hardest

The fact that such a substantial amount of their income is required to meet the cost of necessities means that individuals with lower incomes are being struck three times harder than those with the highest incomes. These costs are out of control and far more difficult to cut than the luxuries that higher earners like to buy. Any savings from the pandemic will thus be lost throughout the course of the next year for the poorest 20% of earners.

Less likely to have been able to accumulate savings during lockdowns, poorer earners were more likely to borrow. Even as the effects of the cost-of-living crisis begin to manifest, the gap between the higher and lower earners, which significantly widened during the pandemic, will grow once again!

Since The Barometer considers the whole family income, persons living alone on middle-class earnings will be struck equally as severely as those in lower-paying professions. They are used to paying the “singles tax,” which makes everything in life cost them more than if they shared it with a partner. However, this will result in an increase in this specific tax. The monthly budget of single people will be hit harder than that of any other form of family by the middle of the next year.

Renters will likewise suffer greatly as a result. According to other statistics from Zoopla, rentals have increased by 11% in the last year, which is a 14-year high, and there is no sign of respite. The Royal Institution of Chartered Surveyors predicts that during the next five years, rentals will increase more quickly than home prices. The younger generation will be most affected, but as more of us rent later in life, the pain will be felt by the whole generation. It’s one of the causes for millennials being worse off than any other generation when it comes down to how much money they have left over at the end of the month.

Due to the strain on lower incomes, it is likely that they will need more assistance as the year progresses, which might result in future government initiatives being more carefully targeted at those who are in the greatest need. It also means that anybody who realises they won’t be able to make it through the month must seek assistance as soon as possible. Debt management charities like StepChange and the Citizens Advice Bureau can help you make sure you’re receiving all of the assistance you can and are well aware of all your alternatives.

Hard times for higher earners

Even for those with larger incomes, things may not always be easy. They’ll keep more of their lockdown savings, if not all of it. However, as interest rates increase, it will become more difficult to pay back debt, particularly for those with large mortgages whose fixed-rate agreements are about to expire. Because they tend to borrow a lot more, people with higher salaries will be especially badly impacted by this.

It will mean that individuals who had previously thought themselves to be quite comfortable are in for a nasty surprise in the coming months. The Barometer examines whether consumers often have financial difficulties at the end of the month. Those who said this seldom happened to them are more likely than any other group to experience a decline in their financial situation at the end of the month, leaving more of them in need of cash.

It follows that even higher incomes would benefit from addressing their outgoings as soon as possible. There is a compelling case for making savings wherever you can and paying off costly debt. Consider, if switching your longer-term borrowing to fixed rates makes sense in your situation so that you can have greater control over your expenses independent of what happens in the larger economy.

The Future

We’re already acutely aware of the impact of prices running way ahead of wages on our lives today, and of the threat they pose a year down the track. What makes this piece of work (The Barometer) slightly different is that it looks at the impact on aspects of our finances that won’t come into focus until later.

Lack of funds may prevent some individuals from setting aside money for insurance against the worst-case scenario. Less than half of us have enough protection – just 43% of single-parent households have the necessary protection for their children in the event of their death. Protecting your family should be your second top priority while organising your finances, after paying off your debts, since anything that happens might have a severe impact on your loved ones.

In addition, as conditions become worse, we’re expected to save less over the next 12 months, fall farther behind on pension savings, and invest less generally. Anyone who manages to keep up with rising costs and still has money left over at the end of the month shouldn’t ignore the need to save money for the long term and develop their resilience in retirement. Pension savings aren’t keeping up with the amount of money we’ll need in retirement to cover rising costs.


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