Five things you can do to curb the rising cost of living

Father on laptop with son playing in the background

Each tap at the checkout is pricier. And every bill through the letterbox has a bigger number on it. There’s no way of stopping it. But there are some practical ways you can get a firm grasp of your finances.

By Sayjal Mistry

We may have had to burrow a bit further into our wallets – and it’s not been helped by inflation or mortgage rates heading skywards [1]Footnote 1, nor the events happening around the world. And now we’re facing a steep climb in living costs too [2]Footnote 2.

Although some things are out of our grasp, we can take action to cushion the blow that the rising cost of living has on our pockets. A YouGov survey found over 40% of people are already making changes to their spending habits [3]Footnote 3. You can do the same. Here are five steps you can take that might help you strengthen your finances.

1. Go over your spending with a fine-tooth comb

There’s never a bad time to review what you’re spending your hard-earned money on, but right now, it should be item number one on your to-do list. Ask yourself, what’s coming in and going out? Can I get something for cheaper? And (often the hardest of all) do I really need that?

Budgeting 101 

First look at the money you have coming into your home – whether that’s just you or with someone else. Next, you want to look at every single thing that’s going out (there may be a lot more than you think). We’re talking the small things, like your streaming subscription you’ve lost countless hours of binging to. And the much bigger things – perhaps the payments you make to your speedy pride and joy on the driveway. Being able to see exactly where your money’s going will help you to pin down where you can make savings and cuts.

Haggle away 

A rise in cost of living raises a lot of question marks but what we know for certain is that things will be pricier. Deals – for anything from your internet to your home energy – may be harder to come by. And it may be trickier than usual to sweet-talk your way to a better price. But it’s still worth a try. Get on the phone to your supplier to see if there’s anything they can do and shop around too.

Trim away the excess spending (for now, at least)

You’ve budgeted and haggled all you can. The only thing left to do is see what you can cut out completely. Perhaps your three-piece suite is just fine or Cornwall is as beautiful as Croatia, there may be lots – or nothing at all. But have a look at what’s coming out and decide whether there’s anything at all you can live without, even if it’s only for a short time. It may be tough but every little (or big) thing you can do right now will help.

2. Take a look at your mortgage options

If you’ve got a mortgage it may have a fixed rate where the interest you pay is the same for a set period. If that’s you, your mortgage payments won’t change until you come to renew. But then you can expect a higher rate, reflecting higher interest rates more generally. If you’ve got a variable-rate mortgage or, for example, credit card debt, rate rises are more immediate. If you’re worried about your situation, do your research and see what options are out there. Speak to your mortgage provider but also shop around to find a solution that works for you.

3. Have a long, hard think before touching your pensions and investments 

Seeing the value of your hard-saved money tumble is tough. But it’s also how long-term investments work. You need to keep calm when stock markets fluctuate.

Investments rise and fall over time so it’s best not to make drastic changes based on short-term circumstances for things that need longer-term vision. This applies to everything from your pensions to stocks and shares ISAs to investments.

So before you do anything, here are a few things to think about first:

  • Although there’s no guarantee that the value of your pensions and investments will go back up, there’s also no way of knowing that they won’t either. By acting while they’re down, you’ll be accepting your losses – rather than waiting to see if things change.
  • Your investments might be spread over different assets such as stocks, real estate and bonds, so just because the stock market’s taking a turn, it doesn’t mean all your funds are.
  • Rolling your old pensions into one could help you cut down on management fees and give you a better picture of how your finances are looking. There are risks involved when transferring your pensions and you may need to get financial advice to do so. Remember the value of your pension could go down as well as up and you could get back less than you've transferred.
  • Speak to an expert. A financial adviser can plunge deep into your finances and make tailored recommendations based on your needs. The adviser will charge you a fee for their services.

4. Keep a firm hold of your emergency savings if you can

We tend to keep emergency savings aside for those drizzly days. Given everything that’s happening right now, it probably feels like monsoon season is upon us. But you should still try to save what you can. You might be wondering how much you need in your emergency fund. We say the sweet-savings-spot is around 3 to 6 months’ expenses. But given the circumstances, aim for as much as you can afford.

The best thing to do is make room for your savings in your budget as one of your outgoings. By doing so, it’ll help you see your savings as a must, rather than a must do later. And if you can, set up a standing order from your normal bank account straight into your savings account – that way you don’t even need to think about it.

5. Need someone to lean on? There are plenty of shoulders out there

The cost of living crisis has affected most of us in so many different ways, including financially and mentally. YouGov found that the number of Brits finding it very difficult to cope financially has been rising steadily since June 2020. And it’s now worse than it was during the pandemic [4]Footnote 4. If you’ve got something in common with those Brits because you’re struggling too, the best thing to do is reach out for support.

Depending on what you need to talk about – debt, mental health or anything else – there are all sorts of organisations and services out there which can help, such as MoneyHelper. If you're struggling with any payments such as the mortgage or energy bills you could also talk to your provider as they may be able to offer ways to help too.