Are price rises going to leave you running on empty?

JUST over half of us, 51%, have enough money left at the end of the month to be considered resilient.

But that’s about to change drastically over the next 12 months, plummeting to one in 10, according to the latest resilience barometer from investment firm Hargreaves Lansdown.

The barometer looked at whether people have enough cash left over to cope with the typical variation in monthly expenses.

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, says: “Already half of us are running on empty, but with inflation set to hit 13% later this year, the 80% hike to energy prices coming in October and with two further energy price rises pencilled in, by the middle of next year only one in 10 people will be able to comfortably make ends meet.”

Lower earners, young people, renters and those in poor health are the most likely to face impossible challenges. Even those who consider themselves to be relatively comfortable face spectacular drops in their resilience.

Who is struggling right now?

People on lower incomes face the toughest battle with their bills. Fewer than 1% of the lowest fifth of earners pass the threshold, and less than 14% of the second fifth.

It’s partly because they tend to earn less that younger people and renters are also more likely to be struggling right now, with just two in five renters passing the threshold, and fewer than one in four of Generation Z (those aged under 26) doing so.

Renters also suffer from the fact they tend to spend almost a third of their income on housing costs.

Those in poor health may also be struggling to hold down a job, which is one reason why they’re less likely to have enough cash left over at the end of the month.

Only one in four of them do so, compared to almost two in five of those in fair health and over half of those in good health.

Single people also face enormous challenges, because there’s only one income to keep the household afloat, and it’s getting stretched in so many directions. Among those living on their own only a third pass the test.

Renters will be in an incredibly difficult position, as the percentage passing the threshold drops from 40% to just

4%. Likewise, among Generation Z, it will fall from 24% to 0.8%, among single parents it will fall from 29% to 3%, and among those in poor health it will fall from 26% to just 3%.

Doing a budget isn’t that exciting but it can really help to save money

Cost cutting and budgeting

With so many different prices rising, it’s incredibly difficult to stay on top of, so by far the best way to cope is to draw up a budget. It won’t be the most exciting way to spend an hour, but it will make all the difference in the coming months and let you know exactly where you stand.

1 Gather the latest information on your finances – bank statements, payslips, credit card statement, household bills and receipts for things you pay for in cash.

2 Know what you have coming in from all sources – your wages, benefits, pensions and investments.

3 Check your statements for how much you spend on bills, and for expenses that hit you less often, such as insurance, holidays or Christmas.

4 Get an idea of what you’re spending the rest of your money on. Some current account apps will put your spending into categories to make this easier. If yours doesn’t, consider a stand-alone app like Money Dashboard or Emma, or the old-school approach of keeping a spending diary for a few weeks.

5 Put all this information into an online budget calculator (try citizensadvice.org.uk or stepchange.org). Or you can write everything down – one column for income the other for outgoings.

6 Use this as an opportunity to shop around on regular bills like broadband if you haven’t already done so.

And use this information to find anything you can cut out or cut back on, check your direct debits and subscriptions to ensure they are for things you need and use. The Office for National Statistics claims 26 million of us are cutting back on non-essentials. Tweak the figures in the calculator to reflect these cuts.

7 If this doesn’t balance your budget, consider whether you can trade down on the essentials to cheaper brands or shops. The ONS stats show that more than a third of us have cut back on the essentials too.

8 If you’re still struggling, you may need to consider bigger lifestyle changes – such as where you live or whether you can afford a car. These are horribly difficult changes to make, but don’t rule them out until you’ve thought them through.

9 Consider whether you are getting all the help you can. This includes support from the state, but also from energy providers, which have grants and cheaper tariffs for people facing real difficulties. If you’re not sure where to go for help, Citizen’s Advice is a brilliant place to start.

10 Once you have made enough cuts to leave you with some cash at the end of the month, put it to good use. If you have expensive debts, your priority is to pay them down. If not, you can transfer this cash into a savings account to help build up an emergency fund.

11 Don’t forget to keep coming back to the budget. Prices are rising so quickly right now that you’ll need to revisit it every few months to make sure price hikes aren’t busting it.