The “cost of living” shouldn’t really be something that strikes fear into the hearts of average UK citizens, however as wages stagnate and basic living costs rise, it’s come to represent a significant financial challenge for many of us — including plenty in full time work.
Essentials such as rent/mortgage payments, utilities and groceries bite a much bigger chunk out of people’s monthly salaries than they used to. Take the struggle to get on the property ladder as an example. House prices have increased by 284% since 1999, while wages have only risen by 27% in the same period.
If you’re struggling to make ends meet when it comes to the end of the month, it’s worth thinking about how you can better balance the high costs of living against your earnings. Here are three key pointers to bear in mind.
Don’t go past zero
If you’re right at the start of your budgeting journey — as in you’re yet to make any adjustments to your finances whatsoever — you should start with instilling the fundamental principle of not spending more than you earn each month. With overdrafts and credit cards readily available to you, it’s easy to lose track of your outgoings and create a deficit against your earnings. This can create a building debt cycle which, once you’re in, you’ll find hard to get out of. Make a note of what you’ve got to spend for the month and do not go past it under any circumstances. This is the foundation for sound financial management, from which you can build onto bigger and better things.
Take a look at your spending habits
Addressing your spending habits is a must if you are yet to do so. Take a month to record every area of you’re spending — if you’re using an online current account app like Monzo, you can use this to help you. When you come to look back on the month’s spending, you’ll likely find numerous areas of frivolous and unnecessary spending that can either be reduced or cut out completely.
This could be anything from cutting out the morning coffee run to a switch of utility providers. If you’ve not tweaked your spending before, chances are you’ll be able to save comfortably into three figures a month. Do an honest review of your outgoings. Support that with a little research and you’ll find plenty of cheaper solutions to your current choices.
A complete absence of savings is a growing problem among younger adults. If you’ve managed to start living within your means and have made some spending adjustments that have created a little excess on the month, the best thing you can do is start saving.
It doesn’t matter how big or small the amount is in the beginning. Getting used to putting aside an amount regularly is a fantastic habit that will help prepare you for some of the bigger challenges. That could be something like a house deposit or just an emergency fund. Either way, you’re guarding yourself against financial hurdles that are likely to crop up in the future, expected or unexpected.
The good news is that the three tips above can be put into practice straight away. Get to grips with how much you actually can afford to spend each month, make adjustments within that amount and look to start putting some money aside. You should find that achieving a decent standard of living becomes much less of challenge.