Februrary 2023

We’re all feeling the pinch of soaring living costs. In this month’s article, we look at how to stay in control of your finances when the price of everything seems to be increasing.

You’ll probably have noticed the cost of your regular grocery shop going up in recent months, as well as increases in your energy bills and what you pay for a tank of petrol. If you’ve renegotiated your mortgage lately, or are on a variable rate, then you’ll have seen repayments rise too. 

Inflation hit a 40-year high in October 2022, with prices 11.1% higher than they were a year earlier according to the Office for National Statistics’ Consumer Prices Index (CPI)1 which tracks the changing cost over time of a typical ‘basket’ of goods and services across food and drink, clothing, furniture, recreation, transport and more. Although the CPI figure has since fallen slightly, to 10.5% in December, and Prime Minister Rishi Sunak has promised to reduce inflation to half this number by the end of 20232, prices are continuing to increase rapidly. 

High inflation is being felt by many countries across the world, driven by supply problems caused by the war in Ukraine and the ongoing effects of the Covid19 pandemic, and in the UK the impact of Brexit rule changes on imported goods. As these pressures ease, or supply chains become better at managing them, the rate of inflation should start to fall. The Bank of England has also increased interest rates, which in theory should encourage people to save more and spend and borrow less, in turn reducing demand for goods and services and helping to slow the pace of price rises. 

In the meantime though, high inflation will continue to erode people’s spending power. The latest cost of living data from the ONS found that nine in ten (93%) adults reported their cost of living had increased compared with a year ago, with 95% reporting increases in the price of their food shopping, 77% in their gas or electricity bills and 48% in the cost of fuel3.

Take control

So what can you do to protect your finances during the cost of living crisis? If you feel you need to tighten your belt, there are several steps you can take to reduce your expenditure or increase your income:

Work out where your money is going

First, you need to understand exactly what you’re dealing with. Use an app linked to your bank account, spreadsheet or notebook to set out in detail all your income and expenditure. This will help you focus on where your money is going and work out whether your outgoings are sustainable at current prices. 

Once you’ve got a clear picture of your finances, it might be easy to see where savings can be made – sometimes it can come as a shock to find out exactly how much you spend on certain items or in specific shops. Check if there are any subscriptions you can live without, especially if your analysis has highlighted ones that you no longer use. 

Cut your energy bills 

With the Government’s Energy Price Guarantee reducing from April, now could be a good time to review your energy usage. Under the Energy Price Guarantee, the Government subsidises the amount you pay for each unit of gas or electricity. From 1 October 2022 to 31 March 2023, the cap means that a typical household will pay £2,500 for gas and electricity, saving approximately £900 on the undiscounted price. From April 2023 to April 2024, the subsidy is due to reduce, so a typical household will pay around £3,000 per year, saving about £500. However, the exact amount you pay will depend on your personal usage, so saving energy will make a difference to your bill.

There are several simple measures you can take to reduce your energy bills. 

Taken together, the Energy Saving Trust estimates these measures could save over £200 a year.

Reduce your fuel consumption

The best way to reduce your fuel bill is to use your car less, so for very short journeys, consider walking or cycling or look at car sharing or public transport. 

Unfortunately, these options won’t work for everyone, so if you have to drive, try to maximise your fuel efficiency to cut the number of times you have to fill up. This includes accelerating gently and maintaining a steady speed where possible, checking your tyre pressure and removing anything from your car that doesn’t need to be there, including roof and bike racks. 

Cut your spending 

When you’re grocery shopping, are there cheaper switches you could try, rather than buying branded goods? 

Also, check the cupboards and plan meals in advance so you buy only what you need. Not only will this help reduce any impulse buys, but it will also contribute to cutting the £19 billion worth of food that The Waste and Resources Action Programme (WRAP) estimates is wasted in the UK each year5

Claiming and using loyalty points where possible can also be a good way to reduce the cost of your shopping or to give yourself or your loved ones a low-cost treat now and again.

You might also consider putting off major purchases – assuming they can wait – until prices are more settled. 

Increase your income

If you’re finding it hard to reduce your outgoings, you could try to increase your income. If you’re employed, you could ask for a pay rise, but that’s not possible for everyone, especially if you’ve already retired. An alternative way to increase the money coming in is to sell items you no longer need – it is simple to sell books, clothes, mobile phones and more online – or take on casual work like babysitting or gardening. The Trading Allowance allows you to earn up to £1,000 per year from these types of activities without paying additional tax.

You could also take in a lodger. Under the government’s Rent a Room Scheme, you can earn up to £7,500 per year tax-free by renting out part of your home, or £3,750 each if you are letting jointly with your spouse or partner. 

Keep investing

Recent research by the Pensions Management Institute, an industry body for pensions professionals, revealed that 7% of employees had decided to opt out of their pension contributions, while 13% had reduced them6. We understand that in the current environment, some clients may have to make difficult choices over how they spend their money, but if you can continue investing, it should help you keep up with inflation over the long term and protect your standard of living in later life. 

Reducing or stopping your pension or investment contributions is likely to have a significant impact on your long-term finances, so if it is a step you are considering, speak to your adviser about your options. If you do decide to make changes, we can help you start your contributions again as soon as you’re on a more solid financial footing. 

Next steps

Most forecasters predict that inflation will come down over the course of 2023, so while we’re likely to face higher expenses over the next few months, hopefully, prices will feel more manageable later this year. 

If you have any concerns at all about your financial situation, please get in touch so we can check your overall plan and ensure that it continues to meet your needs – you don’t have to wait for your annual review. And if you do need to make changes, by working together, we can make sure your future plans aren’t completely thrown off track.


  1. https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/december2022
  2. https://www.gov.uk/government/news/prime-minister-outlines-his-five-key-priorities-for-2023
  3. https://www.ons.gov.uk/peoplepopulationandcommunity/wellbeing/bulletins/publicopinionsandsocialtrendsgreatbritain/21december2022to8january2023
  4. https://energysavingtrust.org.uk/take-control-your-heating-home/
  5. https://wrap.org.uk/taking-action/food-drink/actions/action-on-food-waste
  6. https://www.dailymail.co.uk/news/article-11583115/Cost-living-crisis-hits-retirement-plans-millions-cutting-pension-contributions.html