by Simon Wright

Created on: January 05, 2011

The headlines in the UK at the start of 2011 have been dominated by the controversial news that the government has increased VAT from 17.5% to 20%. This increase in taxation will be felt across all demographics but it’s been claimed that it will be the poorer off who will be affected the most.

Even without taxation increases, the cost of many important items, including groceries and fuel, has been rising in recent months, at a time when salaries have been struggling to keep up with inflation and when many households have had to face up to the hardships caused by redundancies. All of this, of course, is closely connected to the global recession that has taken grip of the world’s economies and the bad news is that most economists are predicting a slow and bumpy road to recovery.

Against this depressing backdrop, the onus has been shifted to individuals and households to find ways to cope with the increased cost of living. I suppose it’s relatively comforting, however, to reflect that we are not the first generation to have to deal with the fallout of a major failure in the Western capitalist economic model. Previous generations faced up to similar challenges and came out intact on the other side. Many of the coping mechanisms that we need to turn to are the same as were utilised by those who lived through the 1920s Great Depression.

Learn the importance of living within your means:

A major factor in the current economic mess is that far too many people have been inhabiting a world of debt and living way beyond their means. It’s time for the old saying of “never a lender nor a borrower be” to re-enter the popular lexicon. Individuals should seek to reduce and pay off all existing bad debt, which includes unauthorised overdrafts, credit cards, and loans, and to then to rigorous in not spending more than they earn.

Implement a budget:

A core component of living within your means is to implement a budget. This basically means that you need to know what you are spending money on, broken down into various categories such as groceries, commuting, entertainment, etc, and then set monthly or weekly targets in terms of how much you are going to spend. Having a budget should result in a more disciplined approach to spending.

Ensure that you get good value from all your purchases:

We live in a time when convenience is king but this often results in laziness when making purchases. Shopping around for the best deal on your insurance, mortgage,

• 1
• 2
• Next Page >>