The cost of living is increasing everywhere in the world. From the United States to New Zealand,
every country in the world is being affected.
In January, the Consumer Price Index in the United States climbed 7.5% year-over-year,
the highest level since the 1980s. By the year's conclusion, prices in the United
Kingdom had risen by 5.4%. And in the eurozone—the 19 countries using the euro—it recently hit 5.1%.
Beneath the headline rate of inflation – the highest in almost a decade – are some even steeper
price rises for many daily essentials, such as energy. This week, officials warned that one
in 10 families is facing a financial crisis this month, and for all but the wealthiest households,
there are shocks at the checkout or when bills land in the inbox or at the doormat.
Today I would like to share with you a story of a family in Norwich who, by all means,
are surviving by battling the high cost of living caused by inflation and are hopeful
we can emulate their survival tactics. This story has been published by The Guardian.
Job, a 35 year old man, works for Aviva and Jess, a 35 old woman,
works at the University of East Anglia. The couple have a daughter, Robin, and a cat, Polly.
The family has a spending spreadsheet and can monitor their finances back to 2018.
What they've discovered is similar to many others and highlights the tough choices people
face as wages are squeezed. In a thorough dive into the Daly household's finances,
we show how the cost-of-living problem is eroding household budgets nationwide. Jess
thinks food and gas prices have risen higher; these prices are frightening.
The Dalys’ are blessed to have money options. They are more fortunate than many families who
are on the breadline this winter, relying on food banks and unable to heat their houses.
The financial crunch has caused people to lower their savings and
assess subscriptions before renewing them to minimize or
eliminate expenses. Their income meets their expenses, and they have no debts.
They do a large food shop every couple of weeks at Morrisons or Asda, then top
up with products from a nearby corner store and small supermarket, in their case, Tesco.
With a small child, they haven't eaten out much this year, so their grocery budget covers most
of their food. Jess no longer eats out, so she enjoys cooking. ‘We go over my food budget every
month. I look at the budget to see where I can save money so we don't go hungry’
Apart from not eating out and exceeding their monthly food budget,
the Dalys’ don't eat most meat and can't afford fish more than once a month.
The pair eat little meat, which helps. But they've observed growing prices. Jess says: "Fish
is costly." "Right now, we can only afford fish once a month. A few salmon chunks cost £7 or £8."
Jon says they're buying less fruit because it's so expensive. A family grocery list
reveals several items costing more this month than at the beginning of the year.
Peppers, cauliflower, and potatoes cost more now than in late December. All of these products
fluctuate in price during the year, but ONS records show a rising trend in the cost of
fresh fruit and vegetables since October 2020, with inflation in both categories is at 1.9%.
Dairy products have also risen. Jon's favorite yogurt is more costly,
part of a 9.7% increase in this category. Cheese, on the Dalys' grocery list,
costs more now than when they put it in their virtual cart in December last year,
rising more than the 3 percent headline rate for "milk, cheese,
and eggs." A dozen big free-range eggs cost £2.15 last month, down from £2.26 the year before,
according to the Office of National Statistics. Jess believes it's "easier to save money" by
avoiding food with a lot of packaging or that's been sent hundreds of miles.
Although their kid is weaning, she eats very little and hasn't increased food costs. The
family says they haven't bought nappies long enough to notice a price increase.
Inflation has also affected the Daly’s cat's food. “Our cat's food is never on offer. I bought 12
packets for £4. Since having Robin, I feel like I've ignored the cat, so I'll grab her favorite
food.” The ONS reports pet items cost 2.9% higher than in October 2017 and vet fees are up 4%.
The family's gasoline costs have also risen. According to official figures, the average cost
of a liter of unleaded reached 146.89p this week. This is 34p liter higher than a year ago and has
affected many families' budgets. Less driving
Jon and Jess don't use the automobile for work, so they don't need it daily.
But they're hesitant even to use it for fun. Jess' vehicle costed over £50 to fill last week,
which surprised her. ‘We won't travel to North Norfolk and burn a quarter of a tank of gas;
we'll do something local. It influences our weekend plans.’
The energy crisis strains many families' budgets. The Daly’s are on a fixed-price
British Gas tariff, so their unit prices haven't risen, but their monthly spending has risen since
they need more heating with a small infant and since they work from home. Jess says:
"Before we had a kid, Jon probably thought I was sparing with the heater. Now it needs more.”
Their monthly direct debit could jump by £20 to £100 in August, and they may have to pay more this
winter. Their fixed rate expired in April, and costs will likely continue to climb. Switching
to the variable rate tariff today would not have any impact, but switching to a fixed-rate tariff
with their supplier would mean paying roughly twice as much. In April, they could switch to
a variable agreement, but a new price ceiling will take effect. Analysts say the threshold
may be 30% more than it is presently, boosting average expenses from £1,277 to £1,660 a year.
The Daly’s trimmed their cable TV and broadband costs, which had "crept up" to £70,
by canceling channels. They now pay £38 for a basic bundle. Before becoming parents,
they went to the movies twice a month, but they've lost track of the expense. Cinema,
theater, and concert tickets are 9.5% more costly than a year earlier, according to the ONS.
The story of the Daly’s may be familiar with what other families worldwide are experiencing,
even here at home. And, based on what we've learned from this story,
there are still more ways to cut your living expenses that we'll share with you today.
Decide on a spending plan. Your cash flow has to be
reevaluated before you can combat inflation. If you know how much money you have coming in
and going out of your bank account, you can better protect yourself against inflation.
If possible, take public transportation. Having just come out of a pandemic,
you may be still wary of using public transport; bacteria is lurking in the air! But here’s the
thing: an hour or two of wearing your mask is less hurtful than the amount you’ll be spending on gas,
insurance and maintenance. Use your vehicle only when necessary. If you have more than one,
consider selling the other automobile if it isn’t an absolute necessity.
Pay off all your credit card debt completely. Debt on a credit card may be quite costly;
therefore, it's better to pay off your credit card debt quickly. The average interest rate
on a non-rewards credit card in the United States is between 16 and 18%, according to
Forbes. Paying off your credit card debt in full can save you from having to pay a hefty penalty
when interest rates rise further. Refinance your mortgage.
We recently met a well-known advisor who acknowledged that she had employed a broker
herself! If your mortgage isn't competitive, consider refinancing.
Refinancing with an alternate lender may entitle you to bonuses and rebates.
Change your health insurance provider. Several health plans are planning to
raise their premiums in April. If you want to avoid paying more, you can consider joining a
health insurance plan that has promised not to raise its prices in the future.
Change your cell phone provider.
You may save hundreds of dollars a year if you switch to a competitor's cell service.
Solar power is the way to go. If you want to save even more money
on your utility costs, consider installing solar panels. Aside from that, government
incentives are readily accessible, and many solar firms are now offering flexible payment plans.
Obtain membership cards at gas stations. Participate in fuel station rewards
programs such as membership cards. You may be eligible for extra benefits and savings.
Get some money for your goods by putting them up for sale.
Observe what's going on around you. There's a good chance that a lot of
the items you own are merely gathering dust. These items may be sold online for
extra money. Shop wisely.
Coupons might help you save money at the grocery store. To get a wider selection and lower prices,
buy at a supermarket or a grocery store. Also, shopping while hungry is a bad idea.
You may be tempted to buy unnecessary meals since they all appear so delicious.
Check to see whether you are eligible for government aid.
Pensioners, caregivers, veterans, job seekers, and retirees will soon
be receiving a windfall from the federal government in the form of cash payments.
Check your state's website to see whether you qualify for a state-specific subsidy.
Buy and stockpile non-perishable goods. Start creating a stock-pile of everyday,
non-perishable goods. Concentrate on items your family uses regularly;
don’t focus on food just yet, we’ll get to that. Think about hygiene products, for example.
The following are a few suggestions for non-perishables to have on hand.
• Disposable towels • Paper towels
• Bar soap • Deodorant
• Dishwashing liquid • Toothpaste
• Dish soap • Clorox
wipes • Diapers
• Wipes for babies • bath and body products
• Vitamins • Over-the-counter Drugs
Get a stockpile of food reserves for your family's consumption.
The United States Department of Agriculture estimates food prices
at the grocery store will rise 5–6% across the board in 2022.
The USDA gave the following price increase predictions for 2022:
• 5.5–6.5% for beef, poultry, and fish • 6-7% eggs
• 6-7% dairy • 8–9% fats and oils
• 6-7% of the fresh fruit • 4-5.5% fresh vegetables
• 5.5–6.5% for sweets. • Bakery goods and cereals—6-7%
On that note, you'll want to stockpile the
perishable foods that you and your family usually consume.
When you see a good deal on the food you use, stock up. If you have the extra freezer space,
take advantage of sales on meat in particular.
When it comes to canned foods and other packaged goods, buy only what
you can use before they expire. If you're wondering what food
to store before inflation rises even further, here are some suggestions:
• Peanut butter (an excellent source of protein) • Pasta
• Canned tomatoes • Baking supplies—flour,
sugar, yeast, etc. • Oils for cooking
• Preserved fruits and veggies • Applesauce
Take Out Term Life Insurance Rather than Permanent Coverage
While I may not be an expert in life insurances it still baffles me (as an amateur),
that so many people pick whole life insurances as opposed to term life insurances. All one needs to
do is compare the costs between the two to see that the latter is far better than the former.
According to Nerd Wallet, for a 30-year term life policy, the average yearly cost is more than 10
times that of a $500,000 whole life policy. In my opinion, I'd rather pay for a term life insurance
policy and put the remainder of the money into a Roth IRA, 401K, or even an S&P 500 Index Fund.
Understand the Difference Between Wants and Needs It's one of my biggest pet peeves when someone
claims they "need" something when they simply want it. The purchase of tools is one of my
favourite pastimes. Just about every tool on the earth has a use for me. That being said,
no matter how badly I desire a tool, it will never be a need.
I need to buy gas to get to work. I need to stock up on food to ensure that our family is
well-fed and well-cared for. Rent, electricity, and insurance are all on my shoulders. Anything
more than that is only a desire. Lastly, some reflections:
An excellent financial goal is to lower your monthly expenses. And the more effort
you put in, the better your outcome will be. What if you got out of debt, started living on
a budget, and used just a handful of the other strategies I discussed in this video? It would
be incredible. In this inflationary period, I do not doubt that you might save hundreds,
or possibly thousands, of dollars each month. Start cutting back on your spending right away!
Well, thank you guys so much for watching, have a great day, and I’ll see you all in the next one.