The International Monetary Fund (IMF) has recently stated that the current dramatic rise in inflation will become increasingly challenging and that a recession seems inevitable. Sadly, those already on tight budgets are often the most impacted by the rising cost of living and fuel. Here we will discuss how to manage your family finances in the face of inflation.
Pay-Off and Streamline Debt
UK interest rates are at the highest they have been in 13 years, with an increase from 1% to 1.25% in the first half of 2022. It is predicted that rates could reach as high as 3% by the end of the year. To say that this will impact household budgets would be a massive understatement. To get ahead of further rises and keep control of your household finances, start by consolidating and streamlining debt where you can.
It’s a precarious time and it’s perhaps no surprise that so many people are struggling to get their financial affairs in order. However, there are plenty of online resources to both inform and assist with implementing changes to ease the stresses of the current inflation situation.
Once you have a clear idea of which debit or credit cards you pay the highest rate of interest on, start paying this debt down first and as fast as possible. Lenders could increase fees as interest rates rise further, leaving you in a tight spot.
Your mortgages are often the biggest financial burden on a household. You could save a lot of money on your monthly expenses by taking advantage of the opportunity to remortgage or change mortgage providers. For instance, with an online mortgage adviser such as Trussle, clients save an average of £339 a month on their mortgages. You can find the best value deals by returning to the market.
A great way to offset credit rate interest hikes is by taking advantage of one of the only upsides of rising inflation and interest rates, increased interest on savings accounts. It might seem like a big ask, but cutting back on spending to make room for even a little but consistent savings is essential.
Change the Way You Shop
Inflation measures the rate at which prices rise over a specific period, worked out by recording the cost of hundreds of household items; this is known as the basket of goods. You will have undoubtedly noticed the sharp rise of the basket or trolly of shopping at your local supermarket.
Some household essentials that have increased significantly in price are butter up more than 13%, eggs up 12% and flour up 16% from the previous year. There are some simple but doable ways to save some money on your weekly shopping:
• Buy in bulk when essentials such as toilet papers or canned foods are on sale.
• Try the non-brand alternatives for the less expensive options.
• Shopping online can help you avoid being tempted to buy unnecessary items
• Try to swap out costly meat options for cheaper non-meat alternatives
• Use loyalty cards, apps and coupons to get offers on what you truly need.
Other small changes that could make a big difference to your monthly budget are cancelling unnecessary direct debits, monthly subscriptions, and using public transport.