How To Cut The Cost Of Living

How much money do you think you are likely to spend over the course of your lifetime?

Recent research by The Prudential has shown this to be, on average, £1,537,280! No wonder most of us feel that our earnings seem to slip straight through our fingers!

Average spending statistics were taken from the Office for National Statistics Household Spending Survey and a separate survey of more than 2,000 adults. Prudential then multiplied the average spending statistics by life expectancy to come to this 'Cost of Living' figure.

So where is all of this money going?

This figure has been broken down into eight main areas (see below). The two biggest being 'Housing, Food & Clothing' and 'Taxes', swallowing nearly £840,000 straight away.

There are ways that we can slash these costs and hang onto some more of our hard earned cash! If you'd like to cut your cost of living, follow these simple tips:


Housing, Food and Clothing: £552,772

Unsurprisingly, these basic essentials account for the biggest share of our lifetime expenses – We all need a roof over our heads and food to eat.

Homeowners, however, can save a fortune by [re-mortgaging], especially if your current mortgage deal is coming to an end or you're currently paying your lender's Standard Variable Rate (around 6.75%).

Every 1% you can save by re-mortgaging can save you £1,000 each year (for a £100,000 mortgage); this means you could be around £83 each month better off straight away!

[Overpaying] your mortgage will save you thousands of pounds in interest and reduce the length of your mortgage too. Just £50 extra each month on a £100,000 mortgage will save you over £15,000 and mean you pay off your mortgage in a little over 21 years rather than 25!

And we can all be careful when shopping, either for food or clothing. Take advantage of those [loyalty cards] (don't let them take advantage of you) and think carefully before buying those 'bargain boots in the sale'. Try to get better value for money by buying clothes using the 'price per wear' theory- if you'll wear a £100 skirt 100x, it costs £1 per wear - cheaper than a £20 skirt that's worn twice (£10 per wear).


Taxes: £286,311

This is where a good proportion of our income goes, but one thing we can make sure of is that we are paying the right amount of tax.

Check your tax code, and use this Payslip Checker to ensure you are paying the right amount of tax and National Insurance. Stamp Duty is now only payable for properties over £120,000.


Leisure and Luxuries: £236,312

Holidays, eating out, sports and hobbies use up another tidy sum, but money can even be saved on the fun things.

Don't just head to the High Street when booking that vacation; why not check out internet holiday companies for bargain breaks and car hire?

Using a [zero percent credit card] to pay for your holiday can effectively give you an interest free loan for up to twelve months and find a great travel insurance policies online too.

You can pay less for your travel money by carefully shopping around, and avoid rip-off 'loading fees' on your plastic by choosing your cheapest credit card to use abroad.


Travel Expenses: £137,126

How many of us run two cars when we could probably get away with one?

You may be surprised to learn that car hire or using a [Car Club] coupled with public transport could save you a small fortune each year – not to mention saving you the hassle of owning and maintaining a car! Not only that but you may be encouraged to walk or cycle more – so you'll be fitter and kinder to the environment too.

Car owners can save a fortune by following our [Tremendous tips for motorists].


Utility Bills: £101,760

Those gas and electricity bills keep on creeping up, don't they! But you can save up to £170 each year by changing suppliers – many companies make switching easy! They can even help you to save money on your phone bills too!

Switching to a metered water system can save smaller households a fortune too.


Legal Fees, Insurance and Financial Costs: £91,395

There's not much we can do generally to cut essential legal fee expenses – apart from marry a solicitor of course! The Citizens Advice Bureau (or even your credit card provider) can be worth trying if you need legal advice. But we can attack our insurance costs – and I don't mean by simply not having any.
Adequate cover is essential – especially if you have dependents, and it can be surprisingly cheap.


Investments: £91,124

One good thing to come out of the report was that we are investing! But a very worrying point has also been raised – the period in which we spend the most is when we earn the least – namely retirement.

And unfortunately there is a gender gap with men saving around £124,000 into investments and pensions compared to a paltry £59,000 for women. What's going on, ladies?

We all need to be saving for our retirement – and the sooner we start, the better – after all, remember the miracle of [compounding]! As a rule of thumb you should aim to put away around half your age as percentage of your salary (assuming you haven't already got any savings put away). So if you're 30, you should be saving 15% of your salary for retirement.

A pension is the most obvious way to do this – and if your employer contributes to yours – don't miss out! That's essentially [free money from your boss]! Why not increase your contribution today – it'll sting at first but you'll soon forget you ever had it – and if you've just had a pay rise you may not even notice.

Other methods include investments and by using a cheaper online broker you can reduce your investing costs greatly. But for those who aren't keen on buying and selling shares, why not set up a monthly payment into a cheap index tracker ISA?

You can save from as little as £25 a month and be exposing your cash to the stock market in an easy, low maintenance way.


Education and Children: £40,650

Finally, education and children cost the average adult over £40,000 over their lifetime.

So there are ways that we can help to reduce our day-to-day expenses. Take a little time to follow these tips and slash yours – and hopefully look forward to a better retirement too!