Rising Interest Rates Signal The Need For Families To Create Long Term Budgets

The cost of living crisis continues across the UK and, now, looks set to deepen. Analysis by Sky News suggests that the interest rate rises hitting the UK, now sitting at 6.5%, will start to impact personal finances to a greater level than ever before. Whereas previously some sectors of society felt relatively unscathed by economic challenges, for the first time in decades, families from across the income divide are feeling the pinch. It’s exceptionally challenging at the moment for many to make ends meet but there are some considerations. Key in any money management measures is ensuring they can be rolled back later, but families must take action to prevent more serious consequences.

Credit Relief

The incoming cost of living payment will provide many homes with respite, according to the Evening Standard. With that respite should come planning, and it may be time for families to look at credit, whether secured or not. When considering the key differences between secured and unsecured loans, interest rates will come into play; the latter will typically have higher interest. However, if budgeted for the years ahead through which the loan will be repaid, credit can be useful. Furthermore, most can be paid off ahead of time if circumstances improve, and indeed should be; interest rates can be renegotiated, too, at a later date.

The Reality Of Supermarkets

Supermarkets have continued to profit during the cost of living crisis, though profits have remained static. Therefore, it’s important to consider where it’s cheapest. This can be surprising in itself. According to Which? research, Aldi and Lidl are the cheapest supermarkets, while Morrisons, often considered lower budget, is above all competitors except premium options Ocado and Waitrose. Think about whether it’s possible to shop in a different way – switching out branded items for supermarket own range for example, or batch cooking to avoid wasting food.

Making Long Term Budgets

According to the Institute for Government, the cost of living is unlikely to return to 20/21 levels until 27/28. As such, budgets need to be long-term and pragmatic. Looking to work and seeing what benefits can be gained is helpful, too; whether angling for a pay rise, or through work and community schemes, getting third party help. Preparing for the long haul is the crucial principle as it is anticipated there will be many challenging years ahead.

It’s definitely a fairly bleak outlook, that can’t be escaped. If it is possible to factor in planning now though, there may be benefits to be had later in the decade. We’re looking at whether we can overpay out mortgage even just a little bit prior to our current deal running out at the end of 2025. As they say, every little helps!

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