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At this rate of inflation, your savings of £20,000 would only be worth £7,788 in real money after just ten years!

Article by Akwasi Duodu

5 ways to deal with the cost-of-living crisis

It’s all quite alarming. The cost of everything is going up. The weekly shop, filling up the car, public transport, holidays, energy bills – everywhere you look, the squeeze is on. It’s easy to feel overwhelmed and depressed, especially when most household incomes are static. What to do? Wait for the government to step in? You may be waiting a while!  Here are five things you could do to help yourself now.

The 5 ways to deal with the cost-of-living crisis we discuss in this article are:

  • Analysing your budget
  • Asking for a pay rise
  • Fixing your mortgage payments
  • Thinking about your long term money
  • Using common sense

Let’s take a look at each in more detail.

1: Analyse your budget.

A budget is a simple list of everything you spend on a daily, weekly, monthly or annual basis, broken down item by item and added up for a monthly total. Put everything you can think of on the list and use averages or over-estimate where expenses fluctuate. If you qualify, the UK government has a scheme to help people deal with the cost-of-living crisis.

Now measure this against your income to establish your net position. If the end result is negative, go through your budget line by line to see where you could make savings. Cancelling unwanted subscriptions and shopping around for better deals could be an easy way to start reducing your monthly expenditure straight away.

2: Ask for a pay rise!

Easier said than done, but one of the ways to deal with the cost of living crisis is to ask for a raise! Yes, it takes guts and can be nerve-racking, however, if you don’t ask, you don’t get. And at a time when the cost of living is going through the roof, I can’t think of a better time to ask.

What’s the worst that could happen anyway? Your boss says “NO”. I have never heard of anyone being fired or demoted for asking for a pay rise, so take a deep breath and give it a try.

Have a plan; start with all the positive feedback you’ve recently had and arm yourself with data and numbers to emphasise and reinforce your value. Finally, ask for an appointment, to ensure that you are able to discuss this private matter on a one-to-one basis with your boss.

3: Fix your mortgage payments.

The Bank of England uses interest rates to combat inflation. Unfortunately, they tend to do so by increasing them, which means those of us with variable interest rates end up paying more at a time when we least need it!

Thankfully, there is a fix. You could fix your mortgage for up to ten years by making a call to your mortgage lender and asking for a fixed rate deal. The best time to do this is now, as interest rates are set to rise even further and at a rapid rate. Fixing your mortgage repayments would give you one less thing to worry about over the next few years.

Related reading: Should I overpay my mortgage?

4: Think about your long-term money.

Where is your long-term money saved? If it’s in a cash deposit account or a current account, it may be worth having a rethink. With inflation running at close to 10% per annum, what good is a 1% interest rate when the net result would be capital depreciation of 9% annually?

To put this into perspective, your savings of £20,000 would only be worth £7,788 in real money after just ten years at that rate of depreciation.

Related service: Savings & investment management

5: Use common sense.

These are pretty dangerous times from a financial perspective.  You may have already thought of some, or all of the ideas listed above and good for you if you have. The easy thing, however, would be to do nothing in the hope that it’ll all somehow go away. External worldwide factors may be to blame but waiting for a fix may be futile. Act now.

5 Ways to Deal With the Cost-of-Living Crisis – summary

And there we have it – a range of tips to help get you through the current economic situation in the UK. Whilst the current situation is hard for many, there are some things we can do to make it easier for us.

As discussed, budgeting and asking for a pay rise are two of them. Secondly, fixing your mortgage payments and thinking about your long term money are important too. And lastly, a bit of good old common sense should help get you through this situation and help you to manage money better during the cost-of-living crisis.

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