UK inflation 2022: How to cope with rising prices
Prices are increasing the fastest in 40 years as higher energy bills affect households across the UK. The UK inflation rate surged to 9% over the past year to April 2022, up from 7% in March. The unexpected increase shocked millions of UK residents who were surprised by a GBP £700 increase in their annual energy costs. Due to the Ukraine war, higher food and fuel costs affect the rising cost of living, which is expected to grow over the year. In this Pacific Prime UK article, we take a closer look at UK inflation in 2022 and how to cope with rising prices.
UK inflation reaches 40 year high
According to Citizens Advice, there is no better time for governments to provide additional support to households. Similarly, debt charities encourage those who are struggling to pay their bills to seek help as soon as possible. Approximately 75% of the rise in inflation last month was due to higher gas and electricity bills. This has led to some drastic moves for many, such as parents feeding children fewer meals and people washing in their sinks since hot showers are too expensive.
A higher energy price cap started last month. With the increase in the maximum price per unit that suppliers can charge, homes that use a standard amount of electricity and gas are seeing average bills of £1,971 per year. Until recently, households with various incomes experienced similar inflation rates. However, the rising prices are now having a detrimental effect on the poorest as they must spend a lot more on their household budgets.
The costs of food, furniture, machinery and various household goods also went up in April. What’s more, entire menus at cafes and restaurants increased as well because of the return of the 20% hospitality VAT rate, which was cut throughout the pandemic to assist businesses. Similarly, average petrol prices in April 2022 were £1.62/litre. This marks the highest on record, compared to the £1.26/litre just the year before.
The ONS estimates that the current UK inflation rate is the highest it has been since March 1982, when it was at 9.1%. With UK inflation forecast to surpass 10% later this year, the UK could be on the brink of a recession, warned the Bank of England.
Ways to cope with rising inflation
Many UK citizens are concerned about money, particularly when inflation rates are growing. Financial worries can have a damaging effect on a person’s mental health by causing feelings of stress, anxiety and overwhelm. Here are some coping strategies that can help households who are struggling with the effects of high inflation, and money concerns in general.
Focus on what you can control
When you’re dealing with challenging financial circumstances, it’s helpful to think about what you can and can’t control. For instance, things like inflation and war are out of your hands. Realising this can relieve some of the pressure and blame that we often put on ourselves, and shift the focus to how we can best handle what is happening around us. That way, we can start to think about what steps we can take to make it through.
Reevaluate your budget
One of the hardest things when it comes to dealing with inflation is that it can not be avoided because it affects so many sectors. To prevent overspending over the long term, it’s advisable to ensure that your monthly budget can cover your needs. This is something that you should always be doing, but even more so during rising inflation. Essentially, you want to be confident that your budget still covers your needs that now cost more.
You might find that you have to change your spending habits to stick within your budget, such as by dining out or travelling less. It’s also a good time to start adding to your emergency savings and paying off debt if you haven’t already, as actions like these can help you prepare for the future. Ideally, an emergency fund should cover three/six months of living expenses.
Remember that this is cyclical
Economic cycles are, indeed, cyclical. So, even though times may seem tough right now, they will be better again in time. One of the best things that you can do to manage these trying times is to be mindful of your money habits. Keep track of the money coming in and out and make adjustments as necessary.
Don’t expect inflation rates to drop significantly over the next 12 months or so, but remind yourself that these levels won’t stay high forever when things get a bit too much. Do what you can to reduce expenses, increase your income or continue to invest.
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