One in three Brits fear they won’t be able to afford their current lifestyle if the cost of living continues to spiral, according to research.
A study of 2,000 adults found nearly eight in ten (77 percent) are “concerned” about rising inflation and the impact it is having on their bills and day-to-day living expenses.
And over half (55 percent) have already tried to offset rising costs by giving up luxuries or reducing non-essential spending – including eating out, new clothes and takeaways.
Inflation rose to 5.4 percent in December – a 30-year-high – and is predicted to hit as much as seven percent this year, leaving millions with higher bills for food, clothes and other living costs.
Rising energy costs mean bills are also on the up, and many face a planned National Insurance hike in the coming months.
To help combat rising inflation, the Bank of England has increased the base rate to 0.5 percent – but, while helpful for some, this also means homeowners not on a fixed rate deal are facing higher mortgage payments.
Now, savings and investment app Moneybox has created an Inflation Time Machine to help people get to grips with how inflation could affect their individual monthly outgoings.
It also aims to help them feel better prepared when considering what they can do now to offset the impact of inflation over time.
It comes after the study also found 39 percent of adults are looking to plan ahead with their finances to ensure they can maintain their current lifestyle in the future, despite the rising living costs.
Nearly one in three (32 percent) feel it is more important than ever to grow their money for the future, with 18 percent trying to be braver with their savings and investments.
Charlotte Oates, a spokeswoman from Moneybox, said: “For many, this will be the first time they’ve seen a significant increase in inflation, so it’s understandable there’s growing anxiety and uncertainty regarding the cost of living.
“The trouble with inflation is that it’s often only felt once your money has been spent, and you realise it isn’t stretching as far as it used to.
“The Inflation Time Machine will help give you a clearer picture of how you might be affected, so you can plan ahead and still make progress towards achieving your financial goals this year and in the years to come.”
The study also found that among those fortunate enough to have some money to spare, 25 percent are looking to Stocks and Shares ISAs to grow their money.
Nearly a third (32 percent) are exploring wider investing opportunities, including individual stocks or opening a General Investment Account, and 14 percent are open to investing in cryptocurrency.
Others are planning to invest in property (17 percent), or put money into Premium Bonds (22 percent), a fixed rate cash ISA (19 percent), or a Lifetime ISA (nine percent).
The study also found that currently, the average adult spends £270 on food each month, and £148 on gas and electricity.
However, this looks set to rise after regulator Ofgem increased the energy price cap –which means many could see their energy bills increase by around 50 percent.
A further £46 a month is spent on their water bill, while £116 is spent on fuel or transport, and £50 goes on their mobile phone.
When it comes to luxuries, £50 is splashed out on nights out, while an average of £41 is spent on takeaways each month.
On average, Brits also try to save or invest nearly a fifth of their monthly income.
A savvy 78 percent are already making changes to their spending to try and offset the rising cost of living, with 36 percent simply spending less on the things they don’t need.
Nearly three in ten (28 percent) are budgeting more, while 25 percent are trying to put more away into their savings.
And others polled, via OnePoll, are selling things they don’t need (23 percent), going out less (22 percent) and shopping second-hand (17 percent).
Charlotte Oates added: “Inflation can impact everything, from increasing the price you pay for essentials to de-valuing your hard-earned cash savings.
“To make your cash savings grow over time, the interest rate needs to be higher than the rate of inflation. If it’s not, you’re losing money in real terms.
“If you already have a rainy-day fund set aside, and you're looking to the long-term, investing is one of the best ways to grow your money over time, and offset the impact of inflation.
“We hope our tool will encourage people to take some time to consider their options and feel ready to face the coming months and years with greater financial confidence.”
TOP WAYS TO OFFSET RISING COSTS:
- Spend less on things you don't need
- Budget more
- Put more away in savings
- Sell things you don't need
- Go out less
- Shop second hand
- Find a hobby that generates a second income
- Invest money in stocks and shares
- Look for a new job
- Open a savings account
- Ask for a pay rise
- Speak to a financial advisor
- Use an app to track spending
- Invest money in cryptocurrencies
- Go for a promotion
