Combatting the Cost of Living Crisis

Financial University

There’s no escaping that energy prices right now are soaring. They’re at record highs already, and are expected to increase ten times faster than wages throughout the rest of this year.

So what can be done? Obviously you and I have no control over the factors driving this increase, so it’s easy to feel helpless. But when it comes to your personal finances, there is always something you can do to make yourself better off. In this episode we look at how to combat the energy price increase and take control of your financial future.

Budget

With your outgoings going up, now is the time to take another look at your budget. What are your monthly energy bills now? How about your spending on fuel for your car? Where is that extra money going to come from?

Perhaps you don’t know the answer to that question right now. Don’t panic.

If you’re in a position where you don’t have the money to pay your energy bills as well as pay for essentials like food, there is help available. There’s lots of great information about this on the StepChange site.

Whatever situation you’re in, knowing the figures is an important first step. Once you know the problem, then you can come up with a solution. So what are some of the solutions we can put in place to help us fight against the rising energy prices?

Reduce usage

Firstly we can look at how to reduce our energy consumption. To do this effectively, we need to have a good idea of what uses significant amounts of energy in our homes. If you have a smart meter, this is a great tool for monitoring and understanding your energy consumption.

The biggest culprits for energy consumption are the things that do some sort of heating. Heating your house will be a big percentage of your usage, but also consider the impact of hot water, your cooker, your washing machine, your dish washer, your tumble dryer etc. Finding ways to reduce your usage here can have a significant impact on your bills.

For example, you might be able to turn your thermostat down a couple of degrees and instead wear another jumper. Or spend five minutes in the shower instead of ten. Or switch to washing your clothes at 30°. Or only boil the amount of water you need in the kettle.

As a one off, these changes might only save you a few pence. But by making consistent changes to your behaviour over time, in aggregate these changes can make a great deal of difference.

So far we’ve looked at savings we can make in the house, but petrol and diesel costs are rising too, so what can we do about that? Again, we need to think creatively about ways we can reduce our reliance on our cars. Can you car share? Could you walk or cycle shorter journeys?

In our household, my wife does the majority of the food shopping, and she does it on a bike with a trailer. I worked out that we save about £85 per year doing this on fuel alone, not including all the car maintenance costs we’re saving too.

If you need to buy a bike, there are hundreds of second hand options near you on sites like Gumtree. If you decide to buy a new bike, take a look into the Cycle to Work scheme. There are also charities that supply free bikes or vouchers towards bikes for those in challenging financial situations.

Spend to save

So far we’ve mostly looked at ways to reduce our energy consumption and save money that will cost us nothing. But there are also many things we can do that might involve an initial expense, but will pay for themselves in the long run.

These are things like insulation. Loft insulation is relatively cheap, easy to install, and is a very effective way to reduce your heating bills. While most houses have loft insulation already, this is usually done to an old inadequate standard, but that’s easy to rectify — all you need to do is add another layer of insulation. Loft insulation usually pays for itself in terms of savings on your heating bill within two years.

You may be eligible for a grant to improve the insulation in your house. Take a look at the Simple Energy Advice website to find out more.

Another place to insulate is your windows. Having thick lined curtains that you draw every night can make a huge difference to how much heat your house loses.

If you are in a position to invest a significant amount of money, solar panels are a great option to dramatically cut your energy usage. We’ve recently had solar panels and home storage batteries installed, and being able to power our house for days at a time without taking anything from the grid is incredible. And we’re far less affected by energy price increases because we’ve made that upfront investment. While the initial investment is considerable, the savings are too, and the payback period can be as little as five years.

Let’s consider cars again. I think a lot of us would like to be driving an electric car rather than having to pay the ever increasing prices at the pump. But electric cars carry a premium.

Let’s say you’re planning to replace your car and instead buy an electric car, which costs you an extra £5000. If you save around 15p per mile on running costs, you’ll need to go 30,000 miles before you start making financial savings.

There are so many variables with cars so it’s really important to run the figures yourself to see if it’s a good solution for your situation.

What’s certainly not worthwhile is taking out an expensive car loan with the aim of saving money. If you save £100 per month of fuel, but are spending an extra £500 per month on car payments, that’s clearly not a good idea. If you want to thrive in your finances you need to avoid debt, and that includes all forms of car payments.

Boost your income

The last area to consider is ways you can boost your income.

Do you have unused items in your house that you could sell for some extra cash?

Maybe now is the time to ask for a raise at work, or to find a new job. If you’re self employed or run a business, now could be a good time to increase the price you charge your customers.

There are also hundreds of ways to generate additional income with a side hustle. Anything from fast food delivery, to transcribing audio, to pet sitting, to writing blogs, to paid surveys — what could work for you? There are plenty of opportunities to boost your income if you’re willing to put in some extra work.

Conclusion

While a sudden rise in energy costs creates challenges, there are steps we can all take to minimise the impact and take control of your financial future. This might even be the catalyst that propels you forward into something new and better than ever before.

Almost everything we’ve covered in this episode is not only going to save you money, but will also reduce your impact on the environment too, so you can help to combat the climate crisis as well as being better off.

If you have any questions or have an idea for a topic you’d like to be covered in the future, please email us at [e-mail].

Take care.

Links

• StepChange Debt Charity
• Simple Energy Advice
• Energy Saving Trust
• Proclaimers