9 in 10 adults make stark spending decisions as cost of living anxiety runs high

The pressure of spiralling living costs is a major concern among UK households with the vast majority looking to make significant lifestyle changes in response to price rises. According to mutual insurer, Royal London, 95% of adults in the UK say they are worried about the anticipated rise in the cost of living in 2022. Women are the most worried, with a third (33%) mentioning they are extremely worried compared to a fifth (22%) of men.

Rise of energy bills is biggest concern

The expense most UK households are concerned about is the rise in energy bills (92%), with three in ten (29%) being extremely worried about this, followed by food shopping (87%). Cost hikes to phone and internet contracts, which typically increase by the more than the Consumer Price Index (CPI) rate, concerns 84% of UK adults.

Difficult choices ahead

The level and speed of price rises, means nine out of 10 of us (89%) are looking to make changes to pay for the cost of living increases.

Worryingly, the option for a fifth (21%) of people is to borrow their way out of trouble, with 7% admitting they simply don’t know how they’ll cover increases and 5% of workers saying they are considering taking out a short-term (payday) loan.

Two-thirds (66%) of people say they will change their food shopping habits, with half of these saying they’ll reduce the amount of food they buy. Other solutions to cut back on costs include reaching for the thermostat and reducing the length of time the central heating is on (46%), turning off the heating in unoccupied rooms (36%) and nearly a fifth (17%) taking the drastic action of turning the heating off altogether.

As part of the cutting-back regime, half (48%) of full time workers feel they’ll be forced to reduce or stop saving altogether.

Further squeeze on the horizon

On top of rising costs, National Insurance contribution rates are also set to change from next month, just as energy bills rise more steeply, which will dramatically affect take home pay. For an individual on a salary of £50,000, that will mean an extra deduction of £464 a year, or £214 for someone earning £30,000. Worryingly a fifth of workers (20%) say they are not aware of these changes, and two fifths (43%) say whilst they are aware, they are not prepared for the changes to kick in.

Sarah Pennells, consumer finance specialist at Royal London, said:

“Just as families in the UK felt they’d seen the worst of the financial impact of Covid, they’re facing a dramatic rise in their household bills. People are having to make difficult choices in an attempt to reduce the impact of rising energy bills, higher inflation, tax hikes and potential interest rate increases. Understandably, this has made many people anxious about their finances, but it’s also testing their financial resilience.

“Household bills are rising steeply, with the cost of filling up the car at the pumps having reached eye-watering levels leaving families up and down the country worried about their ability to make ends meet. Concern is so widespread that families who, on the face of it, would be considered financially comfortable and even those with six-figure incomes are deeply worried.

“With rising prices on many fronts, next month’s rise in National Insurance payments will cause further concern. The move which creates an extra levy on earnings will hit middle-income earners hardest, with them paying a higher percentage of their salary than higher earners. Unfortunately, many are unaware of this forthcoming change. A fifth of workers said they weren’t aware and although a further two-fifths knew it was coming, they admitted that they weren’t prepared for it.”

Anna Stevenson, Senior Welfare Benefits Specialist at Turn2us, says:

“The findings from Royal London are deeply worrying and should not be overlooked. Millions of people are already being forced to make impossible choices in order to survive. This isn’t right. With the cost of living spiralling, we anticipate many more people will find themselves facing financial hardship over the coming months and will be in need of vital support.

"If you are worried about money, we urge you to seek advice as soon as possible. You can do a practical financial health check, which means checking what benefits you are entitled to, or if you have debt concerns, speaking to a specialist debt organisation. Alternatively, you could also find out if you are eligible for any grants, as well as options on how you can reduce expenditure.”

Royal London’s money tips – ways to help manage your finances

1.      Save money on your energy bills

If you’re finding it hard to pay your energy bills, contact your provider as they should help you with ways to pay and don’t be afraid to ask for help from a debt advice charity if you’re struggling.

Switching your energy supplier used to be a good way of saving money on your household bills, but with energy prices soaring, you’re probably better off staying on the standard tariff with your existing supplier once your fixed tariff comes to an end. Some suppliers aren’t taking on new customers, and that way you’re protected by the energy price cap. The government-backed website – Simple Energy Advice - has tips on how to keep your energy bills down.

2.     Save money on petrol

Try using a fuel price checker site to check that you’re always getting your fuel for the cheapest price possible. Other ways to save include: driving at a lower speed and avoiding accelerating and braking quickly if you can; making sure your tyres are at the right pressure and taking out anything heavy in the car that you don’t need to carry.

3.     Food bills

Grocery bills can make up a big proportion of your household spending so it makes sense to look for savings. Plan your meals for a week and then write your shopping list – this will help you avoid buying unnecessary items. Consider changing to a cheaper supermarket or to different brands if you prefer a particular supermarket.

4.     Water bills

You can’t switch water suppliers but there are steps you can take to keep your bills down. Check if you’d save money by switching to a water meter. You can use the Consumer Council for Water’s calculator. If you’re on certain benefits and have a large family or someone with a particular medical condition, you may qualify for the WaterSure scheme which caps water bills. Meanwhile, if you’re on a low income or receiving benefits, check what additional assistance your water company offers.

5.     Council Tax

Depending on your circumstances and who is living with you, you may qualify for a council tax discount. For example, you can get a 25% discount if you’re the only adult living in the property. Find out what discounts are offered by your local council at GOV.UK.

If you’re on a low income or certain benefits you may be able to get a Council Tax Reduction. Your bill could be reduced by up to 100%. There’s a different scheme in Northern Ireland.

6.     Check if you’re entitled to state benefits

Billions of pounds of state benefits go unclaimed each year, and you could be missing out. The national charity Turn2us has a free and confidential benefits calculator on its website (https://benefits-calculator.turn2us.org.uk/), which can help you work out which means-tested benefits you’re entitled to. It also has a grant search tool (https://grants-search.turn2us.org.uk/) for information on grants you may be able to apply for.

7.      Find out where your money’s going

Start by finding out where your money’s being spent. It sounds obvious, but we may not realise exactly how much we’re spending each month – and what we’re spending it on – until it’s laid out in front of us.

Grab your last three bank statements and credit card bills (or check online) and spend some time going through them, highlighting any areas where you think you’re spending money unnecessarily or spending too much. This could be on anything from a top of the range broadband package that you don’t need, to a mobile phone contract where you’re paying for data you don’t use.

Every month money is wasted on unused subscriptions, with the most common wasted money is on gym memberships. A fifth (19%) of UK adults said they planned on cancelling TV subscriptions (e.g. Netflix, Amazon Prime). Even magazine subscriptions of a few pounds a month are money down the drain if you don’t have time to read the magazine. Take a few minutes and cancel any subscriptions you don’t really use to save yourself a bit of cash.

8.     Draw up a budget

Drawing up a weekly or monthly budget will help you get your finances under control. It’s just a list of money you have coming in and what you spend and it doesn’t have to take long to set up. There are plenty of templates online to get you started, like MoneyHelper or Money Saving Expert budget planners.

Alternatively, budgeting apps can also be used to plan what you want to spend and keep track of it.

9.     See if you can pay less interest

If you owe money on an expensive credit card, it may be worth considering whether you can transfer the balance to a credit card charging 0% interest. Although these cards are interest free, you will normally be charged a balance transfer fee of between 1 and 3% of the amount you transfer. Because you won’t be charged interest on your balance, more of your money can go to repay what you owe.

These cards aren’t right for everyone, and it’s important to make sure you can pay off your balance by the time the 0% interest deal runs out. It may also affect your credit score, especially if you do it multiple times.

10. Get help with unmanageable debts

If you are struggling to pay for the essentials, you are using one credit card to pay off another, or your debts are causing you worry, then contact a debt advice charity, such as StepChange. They will be able to give you help with your debts, free of charge.