Inflation has climbed to its highest rate in 30 years, 5.4%. That’s the fastest rise in prices recorded since the consumer prices index (CPI) hit 7.4% in March 1992.
The dramatic increase reflects a rise in household costs, including food and non-alcoholic drinks, as well as higher prices for furniture, clothing and fuel.
The experts at money.co.uk say the news is concerning for Britons, who are already dealing with massive levels of personal debt, largely due to the cost of living, and have urged that it’s more important than ever to keep costs down in the face of price rises across the board.
James Andrews, senior personal finance editor at money.co.uk, said: “Many UK households are facing never-before-seen price rises. This adds up to a cost of living crisis that spells a difficult few months ahead.
“This will put additional strain on millions of Britons, many of whom are already dealing with huge levels of personal debt. Recent research revealed that last year average personal debt in the UK more than doubled in the space of just 12 months to a whopping £25,879 per person.
“Analysis of the figures, revealed in money.co.uk’s annual debt index, found almost a third (32.24%) of people attributed their debt to the cost of living, such as bills and food. While when it came to alternative causes of debt, almost two thirds of people (63.98%) blamed living expenses.
“More than three Brits in ten (31.75%) attributed their debt to credit cards, while personal loans (15.60%), overdrafts (14.15%), car loans (10.95%) and white goods payment plans (10.35%) were the other most common types of debt that people ended 2021 with.
“Current inflation is being driven by the rising price of food and non-alcoholic drinks, as well as surging household costs, especially when it comes to energy bills, while increasing prices of furniture and clothing have also contributed to the rise.
“The challenge with inflation is that it can eat into your earnings no matter how careful you are - with bills like council tax and energy being inescapable. That makes effective budgeting more important than ever.
“One of the simplest ways to achieve this is by creating an ‘envelope’ budget, which means separating your money into pots, or envelopes, for spending on different things. For example, you can create a pot each for household bills, food shopping and rent or mortgage payments.
“If you do your banking by app, your current account provider might let you create these pots to separate out your money already - with the likes of Monzo and Starling offering this service.
“Normally when you’re hoping to bring the cost of your household bills down, it would be a good idea to shop around for a new gas or electricity provider. However, prices are currently at an all time high - so you should be incredibly wary of switching at times like these.
“There are a number of other actions it’s worth considering to keep your household and personal costs under control too - like checking your bills regularly to make sure you’re not being overcharged, taking advantage of relevant tax breaks and canceling services you no longer use.
“For more information on the state of personal debt in the UK, visit: https://www.money.co.uk/current-accounts/debt-index.”
James has spent the past 15 years writing and editing personal finance news, specialising in consumer rights, pensions, insurance, property and investments - picking up a series of awards for his journalism along the way.