We all know that the cost of living is on the rise. The latest inflation figures reveal prices are already rising by 5.4%, while energy bills and National Insurance will both increase in April.
While many price increases are unavoidable, there are steps you can take to support your wallet. Let’s take a look at how you can give your finances a boost over the coming months.
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How can you minimise the impact of the cost of living crisis?
According to Nick Drewe, money-saving expert at WeThrift, there are 10 ways you can protect your wallet when facing a cost of living crisis.
1. Face the facts of your finances
If your finances aren’t as healthy as you’d like them to be, it’s important to understand why. In other words, be honest with yourself. One of the best ways to do this is to take a close look at your recent transactions.
Nick Drewe explains how best to do this: “To get started, grab all your bills and bank statements and circle anything that you are paying for that you aren’t currently using, like subscription services, and cancel and change anything that will help ease the financial strain you might be feeling.”
2. Make sure you create a budget
Creating a budget can help you cut back on spending and improve your money management skills. If you haven’t made a budget before, take a look at our article that explains how to budget your money wisely.
3. Find someone who supports your goals
Getting someone else on board with your financial goals can help motivate you to stick with them, especially if they’re in a similar financial position.
Whether that’s sticking to a budget or cutting back on wasteful spending, having the support of someone else can make the whole process easier.
4. Set targets
You can’t achieve financial goals without setting a target. WeThrift’s Nick Drewe suggests small targets are better than overly ambitious ones.
He explains: “Before taking back control of your money, it is always good to know what your new goals are going to be and how you are going to achieve them. Setting targets that are too big, like saving thousands of pounds, can often set you up for failure as they are completely unrealistic/”
5. Start small
If you’re typically bad at money management, transforming yourself into a frugal superhero overnight isn’t likely to happen. Therefore, if you do want to improve your finances, it’s best to start small.
In other words, perhaps commit to saving small amounts regularly, rather than trying to save a large amount over the course of a year. You may also wish to cut down on discretionary spending. For example, if you usually buy three takeaway coffees a week, try cutting this down to two.
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6. Don’t compare your finances with others
Comparing your finances is unhelpful. As Nick Drewe explains: “A lot of anxious feelings surrounding money often come from when we compare ourselves to others.
“Spending time thinking about how much cash flow someone has to splash compared to yourself is a waste of energy and can leave you feeling on edge about your own situation.”
7. Take greater care with your spending
Unnecessary spending can quickly add up. For example, a £4 takeaway sandwich each workday equates to £80 per month!
While you don’t have to limit your lunch to cold soup every day, taking steps to cut back on unnecessary spending, such as bringing your own lunch to work, can significantly boost your financial health in the long term.
8. Ask for help
According to Nick Drewe, those who are struggling with bills should ask for help. He explains: “If you find that debts and other expenses are too big to tackle, you might want to consider asking companies you pay every month to lower your expenses if you find that you are struggling.”
For example, if you’re to keep up with credit card interest, you can ask your credit card provider to reduce your interest rate. You could also look into getting a 0% balance transfer card to ease your worries!
9. Start an emergency fund
Unexpected costs are a fact of life. An emergency fund can help you deal with unforeseen events, and reduce the need to borrow in future.
10. Keep track of what you owe
Knowing exactly what you owe is key to ensuring your finances do not spiral out of control. As Nick Drewe explains: “When bills on our credit cards start to build up, anxiety can settle in when the time comes to pay it off at the end of the month, but this stress can be avoided if you know exactly what you owe and keep it to a minimum.”
Keen for more money-saving tips? See the Motley Fool’s latest personal finance articles.
