Consumer prices are rising at their fastest rate for more than a year with the UK inflation rate more than doubling to 1.5% in April 2021.
A rise in energy and clothing costs has fueled the higher prices. It is also expected that inflation will continue to rise as lockdown restrictions are eased, and the VAT cut for hospitality businesses is first lessened in September then removed in April next year.
In the face of these rising costs, what can householders do to keep their costs down?
The personal finance experts at money.co.uk have put together some handy budgeting advice to help people negotiate the choppy financial waters ahead.
James Andrews, senior personal finance editor at money.co.uk, said: “With inflation rising dramatically from 0.7% to 1.5% in just a month, consumer prices are increasing at the quickest rate we have seen since the start of the pandemic.
“In the past year, households lucky enough to have managed to maintain a stable income have been able to save money as a result of lockdown restrictions. Less fortunate families will have seen earnings drop or disappear entirely – making price rises a bitter pill indeed.
“And inflation can eat into your earnings no matter how careful you are – with bills like council tax and energy inescapable. That makes effective budgeting more important than ever.
“One of the simplest ways to pull this off is by creating an ‘envelope’ budget. This simply means separating your money out into pots, or envelopes, for spending on different things. For example, you can create a pot each for household bills, food shopping and rent or mortgage payments.
“If you’re comfortable doing most of your banking by app, you may find that your current account provider lets you create these pots to separate out your money already – with the likes of Monzo and Starling can offer this service.
“If not, you can set up direct debits to easy-access savings accounts to hold money for different spending categories, or even go fully old school and withdraw the money as cash and put it in physical envelopes – although you might find it harder to pay some bills this way in the current world.
“There are a number of other actions it’s worth considering to keep your household and personal costs under control too – checking your bills regularly and switching to save, as well as planning commuting costs in advance will help if you’re starting to go back to the workplace.
“It’s also important to make sure you don’t miss out on money that’s available to you – such as the working from home tax break – or keep paying for services you no longer use. All these are well worth exploring and will help keep your outgoings under control.”