The cost of living crisis has left no household untouched. With inflation reaching a 40-year high of 10.1% in September 2022, according to the Office for National Statistics (ONS), it is likely you have noticed the price of everyday living increase this year.
As a mid-range earner, especially if you are aged between 40 and 60, you could be shouldering many financial responsibilities. These might include providing for your children, paying rising bills and saving for retirement.
Indeed, a 2022 Legal & General study found that people in mid-life could be “hit twice” by the cost of living crisis. If your bills rise alongside the financial support you provide to others, you could truly feel the squeeze this winter.
So, here are seven practical money-saving tips for squeezed middle-earners to follow in the cost of living crisis.
1. Request a smart meter from your energy supplier
If you have not already begun using a smart meter to monitor your energy usage, now is the time to ask your supplier.
Energy regulator Ofgem states on their website that “your supplier is responsible for fitting any smart metering equipment”. So, it should be easy to get in touch with your energy provider to request a smart meter.
Using a smart meter can help you keep tabs on how much energy your household appliances use. It can also provide an amazing sense of achievement when you manage to stick to your budget!
2. Formally list your financial priorities
By formally listing your priorities in an effort to see where you can make cuts, you could feel more capable of shaving valuable pounds off your expenditure in the months ahead.
For example, you could map out your essential costs, such as mortgage repayments and school fees, which count as your “base” costs each month. Then, list non-essential spending, and work out how important each one is for your lifestyle and wellbeing.
Finally, test how much you could save by relinquishing some costs that sit lower down your priority list.
3. Start carsharing again
During Covid-19, many of us stopped offering lifts to friends and family, in order to adhere to government guidelines.
If you have got into the habit of driving everywhere alone, you could rethink this strategy. According to the government’s weekly road fuel price report, petrol cost an average of £1.63 a litre on 17 October 2022 – compared with £1.45 at the beginning of the year.
So, it might be helpful to contact colleagues and friends who commute a similar route to you, to open up the idea of a carshare. Shaving a few pounds a week off your fuel bill might enable you to keep on top of rising bills elsewhere.
4. Review your pension contributions
Although increasing your monthly expenditure every month by making pension contributions could sound counterintuitive, maintaining investment into your later-life fund is fundamental.
If you are set to retire in the next 10 or 15 years, you are in a crucial stage of wealth accumulation. Research from AJ Bell claims that quitting pension payments altogether during the cost of living crisis could leave you with a £25,000 shortfall in retirement.
You can read more about the financial impact of slashing pension contributions on our website.
If you are unable to continue paying your usual monthly pension savings, it might be helpful to review your expenditure and reduce, not cancel, your contributions if necessary.
That way, you are still able to save for your future sustainably, without it having too negative an impact on your current financial circumstances.
5. Agree to a minimalist Christmas
As Christmas approaches, you could be concerned about how gift-buying, food preparation and travelling to visit family could affect your financial stability.
The Bank of England (BoE) reports that the average UK household spends £2,500 a month – except in December, where the average expenditure rises by £740.
So, to combat the effects of a pricey Christmas this year, it could be both fun and cost-effective to agree to a minimalist Christmas with your family.
Celebrating in a “minimalist” fashion might mean:
- Only buying one gift, rather than several, for your nearest and dearest
- Hand-making presents, such as baking delicious cakes and biscuits, knitting hats and scarves or making your own Christmas cards
- Making Christmas dinner a “pot-luck” event, with each guest bringing a dish to add to the table.
By agreeing to prioritise financial stability in December, you could still make Christmas special while keeping spending sensible.
6. Explain the cost of living crisis to your kids
It is likely you are no stranger to nagging your kids, especially teenagers, about switching lights off and taking shorter showers.
So, if you have children who are old enough to understand the financial volatility the UK is experiencing, it may help to explain the severity of the situation to them.
Getting the whole family on the same team when you are trying to fight rising costs might reduce your financial stress and teach your children a valuable lesson about managing difficult circumstances.
Although it is important not to increase your children’s anxiety by placing your financial burden on them, making them aware of the cost of living crisis could have a positive impact on your bills.
7. Check in with your financial planner
With inflation at a 40-year high, the pound dipping to unprecedented lows, political upheaval and market volatility, you could feel overwhelmed when you think about money. The good thing is you are not alone.
Instead of trying to shoulder the cost of living crisis by yourself, a more sustainable strategy could be to use the resources available to you – especially your financial planner.
We can help review your circumstances, adjust your retirement plans, mitigate your tax liability and boost your financial confidence in a time of worry.
Get in touch
For a conversation with a trusted financial planner, email enquiries@bowmorefp.com or call us on 01275 462 469.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
A pension is a long-term investment not normally accessible until age 55 (57 from April 2028 unless the plan has a protected pension age). The value of your investments (and any income from them) can go down as well as up, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.
The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation, which are subject to change. You should seek advice to understand your options at retirement
Workplace pensions are regulated by The Pension Regulator.
Bowmore Financial Planning Ltd is authorised and regulated by the Financial Conduct Authority.
