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The cost of living hit a decade-high at the end of 2021 and households could be braced for more bill increases in 2022, especially amid rising wholesale gas prices pushing up energy costs

The cost of living hit a decade-high at the end of 2021 and households could be braced for more bill increases in 2022, especially amid rising wholesale gas prices pushing up energy costs.

But getting on top of your finances from the start of the new year could help you cope better.

Here’s how one couple managed to juggle their family finances and how could help you.

Simone and George, from Manchester, found money worries led to arguments (stock image)

The pandemic has affected the lives of many families, turning them upside down. Many businesses saw their incomes hit as they were unable to fully operate last year while workers may have lost jobs or had their hours and earnings reduced.

One such family that found the pandemic made life tough was the Smiths (1).Simone, who runs classes for children, and George, a black cab driver, both saw the demand for their services drop during the pandemic, and therefore their income dropped too.  They both worried about providing for their family.

The couple found their savings were depleting until they assessed their finances and adapted their budget.

But while restrictions may have eased and they can get back to work, the risk of new variants could still threaten people’s livelihoods, and households like Simone and George’s now also have to deal with the prospect of rising bills.

Bill pressures

Households are facing higher energy bills due to wholesale gas prices hitting record highs.Smaller suppliers have collapsed – 28 energy suppliers went bust last year(2) – and this reduces competition in the market. 

Citizens Advice (3) has warned that soaring wholesale gas prices could force Ofgem’s price cap to rise from its current £1,277 to at least £1,891 in April.

Households are currently struggling to find fixed price energy deals that are cheaper than the cap but this isn’t the only bill that is on the rise.Inflation, which is the measure of the cost of living, hit a 10-year high of 5.1 per cent in December.

The Office for National Statistics (4) attributed this to rising energy, fuel and food costs.

This prompted the Bank of England to take action in December.It increased interest rates, the cost of borrowing, for the first time in three years from 0.10 per cent to 0.25 per cent.  

It’s no surprise amid all this upheaval that Lloyds Bank research(5) shows more consumers are becoming concerned about the rising prices of day-to-day items. 

Lloyds Bank’s internal consumer sentiment survey(5) found 51 per cent of consumers feel concerned about their future financial situation, as mirrored in Simone and George’s story.

Adapting to the post-pandemic environment

The pandemic and economic uncertainty has encouraged many people such as Simone and George to change the way they manage their money.

The couple admit that the income pressures caused a lot of tension and arguments until they agreed to sit down and discuss their feelings, as well as their finances.

Simone says: ‘We started by sitting down and talking rather than arguing, which was a big release.

‘We looked at what was coming in and out each month to decide what bills were necessary.’ 

This is where having your bank on side can help.

Lloyds Bank has plenty of tips online to help people budget and get their money under control, such as regularly reviewing your bills and setting renewal reminders so you remember to switch if you can save money.

Lloyds Bank even has its own  and branch staff who help customers get an overview of their income and spending, so that helps customers automatically sort their spending into categories such as groceries, entertainment and public transport.

This makes it easier to monitor where your money is going and make changes you could make to cut unnecessary spending.  

Lloyds Bank has a money manager service that helps people budget (stock image)

Simone adds: ‘We are on the road to recovery but we are not there yet.

‘It is always a constant worry as things aren’t fully back to normal.’

Simone says they meal plan and budget for their weekly shop but are already noticing food price rises despite not buying more.

She says: ‘The timing is rubbish just as everyone is getting back on their feet

‘We have to make sure those bills are covered – the last thing I want is to be in same state as in the height of the pandemic when we were worried all the time.’

She said rising bills may mean it takes longer to save for their goals such as the new car.

If things get worse, the couple said they would consider cutting luxuries such as UK TV Abroad streaming services but are determined to keep paying for their daughter’s dance classes as they don’t want to take away something she enjoys.

She adds: ‘If we calculate our budget then hopefully that worry won’t be as much.’