22 October 2023
The rising cost of living and impact on PCU members
WHY ARE COSTS RISING
Living costs are going up because the average price of goods and services has been increasing faster than people’s wages and income. This, combined with expected tax increases and a rise in National Insurance (NI) contributions, is leaving many households on tighter budgets and struggling to make ends meet.
In addition, inflation (the rate at which the prices of goods and services increase) has been going up due to a number of factors, including higher global oil and gas prices, coupled with uncertainty over supply chains and staff shortages. When companies face higher operating costs, they often put up their prices, creating a knock-on effect.
According to the Bank of England, inflation is expected to slow down in 2023
HOW TO COPE WITH HIGHER LIVING COSTS
Here are some things you can do to help you financially.
Whatever your situation, creating a budget can make it easier to manage your money. It will help you see what money you have regularly coming in and going out and possibly find areas to reduce your spending.
A budget is a plan for how you’ll spend your money, including limits for spending on certain things.
Knowing exactly how much money you've got coming in and going out - as well as where it goes - can help you prioritise spending. This means you can make your money last and potentially save more each month.
An app or online budgeting tool can be a great resource, but a spreadsheet or a notebook and pen can work just as well. Whatever you choose, make sure it’s something you can keep track of and update.
Note your income and expenses
Review how much money you have coming in on a regular basis, like your salary. If your income changes from month to month, work out the average over the last 3 months.
Then, looking at your bank statements or transaction history for the last 3 months, work out your average monthly spend. By comparing your income and expenses, you'll see if you're living beyond your means or have money left over.
It can be helpful to put your expenses into categories so you can see specific areas where you may be overspending. Include regular outgoings like:
- utility bills
- rent or mortgage
- groceries
- eating out
- shopping
- transport
If you feel you're spending too much or want to save more each month, look at what you can change. There are budget planner apps that you can use to help with this. But the aim is to see how you spend your money. You will need a breakdown of your outgoings, including any money you may have left over. You could then try making small adjustments to your spending, like cutting out the odd takeaway or cutting down on your weekly grocery shop.
You might also be able to save money on your energy bill by making your home more energy efficient, or switching provider.
Once you've decided where to make changes, set yourself a monthly (or weekly) goal for spending in each category. This might include some trade-offs along the way. If you have some money for new clothes, it might mean choosing between a pair of trainers or a jumper. The other one will have to wait until next month.
Account for irregular costs too, such as car tax, holidays and events. Allocating a certain amount for unexpected costs at the start of your budgeting period, or saving a little extra to go towards these costs, can be useful.
If you have money allocated for savings, move it into a savings pot or an account as soon as you get paid. This can reduce your temptation to spend it elsewhere.
It’s good to aim high but be realistic - making things too hard may mean you get quickly disheartened.
Review your budget regularly to check you’re sticking to the plan. Pay close attention to how you’re tracking against each category. This will tell you where you may want to cut back or adjust your budget. If your budget has fallen by the wayside, that’s okay - you can always review again to get your finances back on track
If you need support reviewing your finances, or you’re finding that rising costs are simply making things unaffordable - we’re here to help.
Check what you’re paying for.
Go through your bank statements and look at your standing orders and Direct Debits to see what you’re paying for. You may be able to cancel and save on subscription servicesyou no longer use, for example.
Now is also a good time to review existing policies, such as home insurance, utility bills, broadband or phone contracts - to make sure you’re getting the best value for your money. It’s also worth noting down when policies are coming to an end - as you can often negotiate better prices before they auto-renew.
Paying off debt in a smart way can reduce the amount of interest you pay. For example, if you’re being charged interest on your credit card, a 0% balance transfer credit card could save you money.
If you have multiple debts, a cost effective option may be to repay the debt with the highest interest rate first, as it’s charging you the most to borrow the money. Keep in mind - you’ll still need to meet at least the minimum repayments on all debts to avoid charges.
If juggling multiple debts is too stressful, a debt consolidation loan can be a way to simplify your repayments and help you get back on track. However, it’s important to consider whether you’ll repay more on a monthly basis and over the course of the loan.
Benefits and other government support can help if you’re out of work or on a low income, but you may be eligible for other types of support too. For example, free childcare, or a Council Tax discount if you live alone. Go to www.gov.uk/browse/benefits to check if you’re missing out on unclaimed benefits.
Millions of households face much higher bills because of an increase in the energy price cap. From washing your clothes at a lower temperature to switching energy suppliers - there are ways you can save money on energy. You can also reduce your energy bill by making your home more energy efficient. For example, by draft-proofing unwanted gaps and insulating pipes, you can reduce heat loss and save money.
Food shopping is one of the biggest weekly household expenses. From setting a budget, to planning your meals and storing your food, there's a range of things you can do to make your money go further at the supermarket.
You can check local fuel station prices online before filling up, or take advantage of loyalty schemes. There are also ways you can make your car more fuel-efficient, so the fuel you do buy, lasts longer. For example:
- keep your tyres inflated - your car will use more fuel if the tyre pressure is lower or higher than the recommended amount
- lighten the load - if you can, avoid driving around with a full tank of fuel and a heavy boot
- accelerate gradually - the harder you press on the accelerator, the more fuel you’ll use
- change up a gear sooner - to avoid having to accelerate as much
You may have tried everything and cut back your spending on all but the bare essentials. But what if it’s not enough? If you’re unable to afford the cost of living, here are some ways you can get help:
When debt becomes overwhelming, it can be hard to know where to start. But remember - you can get support. Make a clear list of all your debts and the amount owed on each. The aim is to pay the priority debts first - the ones with the biggest consequences if you don’t pay, such as your mortgage or a court-ordered payment.
Speak to the companies you owe. They can help you create a repayment plan that’s manageable and will prevent you from missing any future payments.
If you’re a PCU customer and you’ve missed - or are worried about missing a loan repayment, get in touch straight away, you will receive a sympathetic response - we’re here to help.
If you’re struggling to pay your bills, or are worried about future payments, it’s best to get help straight away - don’t ignore them. Speak to the companies you owe to let them know. They may be able to offer other options for how or when you pay.
If you’re worried you won't be able to make future mortgage or rent payments, or are already in arrears, get in touch with your mortgage lender or landlord as soon as possible. If your mortgage or rent isn’t paid, the money owed is called 'rent arrears'. These are priority debts, which mean you should sort them out first, before tackling other debts - to avoid the risk of eviction. When you contact your landlord or mortgage provider, offer to pay what you can at this stage - you will get this figure from your budget.
It’s important you stick with the new payment plan if agreed. If they refuse your offer, or don’t reply - it’s important you make the payments anyway.
If you’re worried about rent arrears or eviction, contact StepChange debt charity on www.stepchange.org they can help you understand your rights and what to do next.
If you’re struggling to pay for food, can help, as well as provide other household items like toiletries or cleaning products. Contact www.trusselltrust.org. To be eligible, you’ll need a referral first, which you can get through the food bank directly or one of the following:
- a GP, health visitor or social worker
- police or probation worker
- children’s centre
- Jobcentre Plus
- Citizens Advice
The government is offering one-off payments to help with the cost of living. These include money for those who:
- have a disability
- are on means-test benefits
- receive the winter fuel payment
The Energy Price Guarantee became effective on 1 October 2022. This is a new price cap which limits the amount suppliers can charge for each unit of gas and electricity they supply. This means a typical UK household will pay no more than £2,500 a year. The scheme was originally planned to run for 2 years from 1 October 2022 but will now be in place until April 2023 only. This is in addition to the £400 energy bills discount to help households over winter. This non-repayable discount will be applied in 6 instalments between October 2022 and March 2023.
But everyone is entitled to some help to cope with rising costs. There are over 40 government schemes. For more information about government support visit
