Inflation rising: here’s how to prepare for an unexpected bill this winter

UK adults are anxious about their money, as our own Mouthy Money study shows three quarters (75%) are concerned about the rising cost of living as inflation continues to rise.

The survey from the latest Mouthy Money Matters Index shows more than half (55%) of Brits are worried about how they would cope when faced with a large, unexpected bill.

People are particularly worried about the rising cost of living in the UK as the price of essentials are driven up, according to the data.

Inflation and unexpected bills

One respondent expressed their concerns, commenting that: “The poorest and most vulnerable in society are being forced more and more into poverty.”

Another added: “It infuriates me that interest rates are kept so artificially low while inflation is at least 3%, so that the value of my carefully-accumulated savings is eroded every day.”

Edmund Greaves, co-editor at Mouthy Money says: “I think, inflation, the general cost of living going up in prices is a big, big worry at the moment for all of us and that’s reflected in the research.

“There is starting to creep in worries about Bank of England rate rises. If you have debt on a credit card, and the Bank of England suddenly shoves the interest rates up, then your monthly payments are going to go up.

“And that’s the same with a mortgage as well. If you’re not on a fixed mortgage deal, it’s going to hit your mortgage, and you’re going to end up paying more money not just every month, but over the life of the mortgage.”

His advice is to lock in and new fixed-rate deal for your mortgage, and make sure that you’re not suddenly paying extra money in three months’ time, just for having not been proactive.

Readers listed items such as food, petrol and clothes as areas that they were particularly anxious about paying for, whilst one in three (36%) readers revealed that inflation will mean they won’t have enough to pay for the basic daily essentials.

It’s physical goods, stuff you’re buying and using, which I think people need to be worried about.

Edmund Greaves

Greaves expects general supermarket, local shopping, and delivery prices to go up because of supply difficulties, with less concerns about services such as Netflix. “It’s physical goods, stuff you’re buying and using, which I think people need to be worried about, as it is the supply chain crisis which is ultimately squeezing demand.“

Savings and investing habits

The Mouthy Money Index also highlights that:

• a third (33%) of Brits say they have less money left over at the start of the month than they did before the pandemic
• and nearly half (48%) of UK adults saying they have become more concerned with how much they earn since the pandemic began.

However, other notable trends that have started with the pandemic are that more people want to build up a savings buffer (45%), followed by paying down debts (28%), and investing (24%).

Greaves adds: “We’re also seeing a rise in people taking more agency with their employment, so that’s not being willing to just accept what an employer tells you, what they’re going to give you.

“I think people should be given the opportunity to have more money in their pocket, and decide what they spend it on, and how they spend it, rather than, existing in some sort of low inflation, low wage growth environment where everybody just gets stagnant and doesn’t feel better off every year.”

“With things like investing and saving, people seem to be getting more savvy about the idea that saving accounts are not going to do your money any good because it’s always going to devalue, because inflation is what it is.”

How can you protect yourself financially from price hikes?

There are a few simple ways you can protect your finances from unexpected bills and inflation, such as:

• haggling over energy or gas bill prices
• cut unnecessary costs such as unused gym subscriptions
• sell things or clothes you don’t use anymore on websites such as eBay or Depop
• postpone big purchases until the lorry driver shortage will end (it is estimated that the shortage situation will get better after January)

When it comes to saving more the most important thing to do is make sure you have an emergency cash buffer and avoid bridging any budget gaps with debt. Once you’ve built up a buffer it is good to start saving for the long-term by:

• move your money from your savings account to an Investment ISA tax wrapper
• investing money in stocks and shares
• Make sure you’re contributing as much as possible to a pension
• Open up accounts such as a Lifetime ISA (LISA) if you’re saving for your first home

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