There are loud cries worldwide about an unprecedented high cost of living. The rise is happening at a rapid rate because there are several contributing factors. Read on to determine the causes.
The Increasing Cost Of Gas And Energy
The oil demand has increased after a slump during the Covid-19 pandemic to reach a seven-year high. The story is similar in America, Europe, Asia, and other parts of the globe. Increasing demand for oil coincided with an increase in heating bills. After the depletion of gas reserves during the cold winter, high demand in Europe triggered a price increase.
End of Covid-19 Support
The support governments gave to businesses when the coronavirus effect was at its worst is ending. Public borrowing and spending during the pandemic increased across the globe. The borrowing led to tax rises contributing to a higher cost of living even as wages remain the same. Any developed economies created policies to protect workers and the lowest paid. The support measure is also coming to an end when inflation is increasing.
Shortage of Goods
The price of many consumer goods increased during the pandemic. Consumers spent more on home improvements and household goods because they could not go to restaurants or elsewhere during Covid-19. Some manufacturers in countries that faced lengthy shutdowns are still struggling to meet the demand.
An inability to reach previous supply leads to a shortage of materials such as steel, plastic, and concrete. Their prices went up. Major retailers in the US increased their prices to deal with a higher supply chain cost. Microchips shortage also increased the cost of production because they are vital components in computers, vehicles, and many household goods.
Higher Shipping Cost
Surging demand for goods after the worst moments of the Covid-19 pandemic extended the need for shipping services. Global shipping companies now charge retailers more to transport their cargo. The retailers pass the cost to consumers. For instance, the price oftransporting a container to Europe from Asia is around ten times more than a year before. Freight fees have been rising, and a driver shortage in Europe is worsening the situation. Transport challenges were easing around December 2021, but the emergence of Omicron and other Covid variants slowed the gains.
Many people lost or changed jobs during the pandemic. As a result, companies face challenges recruiting staff such as waiters, food processors, and drivers. For example, a survey of major retailers in the US showed 94% had trouble filling the empty roles. Some companies solve the problem by increasing wages or giving sign-on bonuses to retain and attract staff. They pass extra employer costs to the consumers and, in a way, contribute to increasing the cost of living.
War in Ukraine
War in Russia has increased inflation by causing uncertainty in the global economy. The war affects the energy and food sectors, yet they are prone to high inflation. Countries cannot get energy supplies from Russia as they wish after sanctions for attacking Ukraine.
A scarcity of oil and coal is increasing the prices of energy. Ukraine was a large exporter of wheat, corn, and other agricultural products. War stopped trade in Ukraine, impacting food prices in Europe and the Gulf.
Tips For Surviving High Cost Of Living
The effects of the high cost of living might be here for a lengthy period. It is essential to take the steps below and ease life at this difficult moment.
Create a Budget
Write down the essential areas to allocate your money and the amount to spend for each. A budget helps monitor and adjust your money’s overall spending to serve the most important needs. You can avoid the complexity of listing all items in a budget. You can separate them into:
Allocate your income to fixed monthly bills and essential needs like gas and medical expenses. Remember to spend some money on debt payments. Do not spend the leftover freely on fun without depositing an amount into an emergency fund.
Reduce Energy Consumption
Electricity costs account for a substantial amount of a household budget. Heating, cooling, lights, and appliances are indispensable in a home, but you can do something to cut the expenses. Here are some of the ways to reduce energy consumption.
• Switch off lights, computers, and other appliances when not in use
• Run the dishwasher only when it is no full load
• Turn down your thermostat
• Hang laundry outside instead of running a dryer
• Install a programmable thermostat
• Use energy-efficient bulbs
• Ensure the HVAC system undergoes routine maintenance so that it does not use too much energy to run
Consolidate Debt Repayment
Combine different debts into a single monthly payment. It will reduce your interest and the time it takes to clear the debt if you progress from just making the minimum payment. Credit cards take a significant portion of income. Analyze the interest payment for each card and do away with those charging very high interest. If possible, you can temporally stop using credit cards.
Eat At Home
Going out for meals or ordering from home might seem convenient, but the cost is high. Eating at home most days of the week will save you a lot of money. A simple way is to prepare a weekly meal plan and stick to it. The internet has various recipes that can help you plan your weekly meals. You can prepare your meals on the weekend and refrigerate them for daily consumption.
You might not think much about cable TV, internet, cell phone, publications, and streaming service subscriptions, but they draw money from your monthly account. Cancel subscriptions you do not need through email and unsubscribe to newsletters or advertisements from the canceled subscriptions.
Kick Money-Consuming Habits
Habits like smoking, vaping, and heavy drinking might be fun, but they consume a lot of unplanned money. Calculating the expenditure on non-essential habits is a motivation to kick out the habit.
Take Advantage of Reward Programs
You collect many reward points per year by swiping credit cards to pay for goods or services. You can save a lot by letting the points accumulate for a period and claim them for a large purchase.
The cost of living might not reduce soon. Track your expenditure and spending habits to determine anything you can strike off to start saving.