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04 Jul 2022

Making Cents: Ideas to beat the cost-of-living crisis

Making Cents: Ideas to beat the cost-of-living crisis

Prices on average, as measured by the CPI, were 5.0% higher in January compared with January 2021                                                                                                      

WE ALL know food, fuel and energy costs have skyrocketed in recent weeks and with inflation at a 21 year high, we’re all feeling the pinch, and it’s actually more of a bite than a pinch.
And the bad news is that it will probably get worse before it gets better.
Some people who were already carrying a monthly deficit are now seeing a much higher one, and those who once had a healthy surplus are seeing that reduced significantly or being wiped out altogether.
I also appreciate that low-income households and those on fixed incomes are feeling the increases a lot more than anyone else.
Regardless of your particular circumstances, understandably I think most people are looking for ideas to counteract the increased costs we’re seeing, so I’m going to put forward some suggestions over the next couple of weeks that I’m hoping you might find useful.
I want to give you some ideas that you can act on and implement easily and more important than anything else, if you follow through with some of these suggestions, you’ll be able to feel and see the impact quite quickly.
And some of these proposals may not bridge the gap entirely, but they may help reduce a deficit if one exists. The goal with putting these in front of you is to help take the pressure off somewhat. And I know they may work for some people and not for others, it will really depend on everyone’s individual’s circumstances.
I’m also conscious that the rise in inflation is not the same for everyone. The average rate at the moment is 5.6% but that’s not likely to be your inflation rate. We all consume different things and we all earn different incomes and have different outgoings so our personal rate of inflation will vary from the average rate.
And if you feel some of these ideas don’t apply to you or you feel some are patronizing , they’re really not meant to be. I’m just trying to cater for everyone that’s all.
A last heads up before I continue. I’m not going to tell you to drive slower, make a list before you shop, make homemade shampoo, grow your own vegetables etc. although perhaps some people do this and it saves them money, they are just things I wouldn’t do.
I think with some of these strategies it’s hard to know or measure if what you’re doing is actually saving you money or not. And perhaps I’m the fool for not taking advice like that on board, but there you go, I can and only ever will tell you things I’d personally do.


Know What You’re Up Against
Okay, the first step in trying to reduce your outgoings is figuring out how much you spend, and sometimes this is an area people struggle with and underestimate how much they actually do.
Their perceptions and realities are different things. And this probably applies more to those who don’t follow or have created a monthly budget than those who do. People who are on a fixed income and have a budget in place, can account for every cent they spend.
When you know what you are spending your money on each month, you can make the necessary changes, because you can’t change what you can’t measure, right?
You need to know and account for where your money is going and I mean where it’s really going. Don’t just say, it’s on fuel or electricity and food. You need to make a list of everything you spend money on each month and put a number alongside each.
And you might be surprised what you’ll find and maybe you won’t, but just find out anyway.
With all the increased costs, you need to figure out what your number is, and once you do, you’re in a position to take action.
And when I say number, I mean the difference from what you earn, and what you spend.
Your spending will fall into two different categories i.e. your fixed outgoings and your variable ones. Your fixed outgoings should be easy enough, they are what they are and should be relatively consistent each month.
It’s the variable expenses that you need to watch out for, because they’re the ones that normally people run into trouble with. More of how you tackle them next week.
And to begin with you may not know if the amounts you’re writing down are absolutely correct or not, but it doesn’t matter, get them down, and they can be amended later, just the act of beginning this process is very important. But, if you’re very unsure about the amounts, checking your bank statements is a good place to start.
When you start to get the numbers down, factor in all the increases we’ve been hit with recently.
The amount you’re putting under electricity and gas should have increased by about €700 from what it was last year. Write down the amount you think you’ll spend on fuel over the next year. If the cost per litre remains the same, that could be an extra €1,200 over the next year, but this figure will vary on how frequently and far you travel, so just work out what you think it will be for you.
And because food prices will be higher, maybe you think that means you’ll spend an extra €2,000 in the year ahead, and if you do, write it down.
When you add up everything and those increased costs are going to add, say €3,600 to your spending during the year, now at least we have our target number.
And I’d say break down this number into a monthly one, because it might seem a little less overwhelming trying to find €300 every month than one much higher number.

Target Number 1 – Highest % of Income Expenses
I created an excel document to record my expenses and I think I’ve accounted for nearly everything you could think of.
One of the reasons I like using it, is because it shows me what % of my income is going in different categories and this is important to know, because if you need to reduce your outgoings, start with targeting the ones that are accounting for the highest % of your income.
If home expenses account for 30% of your income, it could be easier to find a 5% reduction from that, than the same saving from something that accounts for 3% of your income.
And that’s a mistake some people make where they spend a lot of time and energy trying to find big savings on small outgoings rather than small savings on big outgoings.
So, work on those expenses that account for the biggest percentage of your income first, and work from highest to lowest. And if you have a mortgage and haven’t reviewed it in a while, there’s a good chance you might be able to reduce its cost.
You could explore moving to a fixed rate if you’re on a variable rate or looking at green rates which offer a lower rate if your home has a high energy rating, or perhaps moving to other providers who have better rates than your existing lender.
One client of mine who was feeling the pinch, moved her mortgage which was at 2.95% to a provider offering 1.9% and based on the amount she owed and the term remaining, saved €298 per month.
For every .5% you can reduce your mortgage rate by, you’ll save about €25 for every hundred thousand you owe. So, if you owe €300,000 and you can reduce your rate by .5%, that’s a monthly saving of €75.
Okay, that’s about it. Next week I’ll continue and we’ll look at those variable expenses, and I’ll also be giving you some ideas about how you can earn more money, one of them being €1,167 tax free per month.

Liam Croke is MD of Harmonics Financial Ltd, based in Plassey. He can be contacted at liam@harmonics.ie or www.harmonics.ie

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