Last week it was revealed that the price of the average household shop is going to increase, in some cases dramatically. The main cause is a worldwide wheat shortage, brought on by a combination of bad weather and poor market prices prompting farmers to grow other crops.
As wheat is an integral part of so many everyday household products – such as breakfast cereals and bread – the shortage has been predicted to have a tangible impact on the average British purse.
Budgeting is key to avoiding financial problems
Families and households with limited budgets will be the hardest hit, making it essential that some form of financial planning is implemented to avoid being caught out. Debt consultancy Thomas Charles told families this week they should budget their finances so they have "enough money to fall back on" should times get hard.
Managing director James Falla explains: "A family needs a budget to understand how much money is going in and how much money is going out. Once you have understood that, then you can assess which areas are likely to increase if you have children and which are likely to not change."
Don’t use credit cards and loans irresponsibly
"If you have no idea of the money coming in and going out then you tend to spend money willy-nilly and that’s when you start using credit. You start using your credit cards and your overdrafts at the bank because you’re not really used to working within a budget. If you don’t set yourself limits then you’re not going to stick to them," he added.
Emphasising the importance of having savings in place when it comes to dealing with unforeseen circumstances, he said: "If you know one of you is going to be off work for a certain amount of time – and going to lose a certain amount of money- you do need to put some aside to tide yourself over."
Use credit if you must – but always read the small print
But what if there is no money in the current account and the cupboard is bare? How should households deal with the problem of having to spend money on essentials when they don’t really have any to begin with?
In some cases, it will be essential to use credit facilities, but they should be used carefully. This is especially true if relatively small amounts of cash are being borrowed via credit cards or loans, according to Libra Financial Planning.
Many small cash loans attract a higher rate of interest and "a lot of people don’t read the small print and get caught out in the future," the company warns.
What should you do now?
- If you have outstanding debts why not see how much you could save with a consolidation loan – use MoneyExpert’s debt calculator today
- Try a 0% balance transfer credit card and reduce your outgoings – don’t forget that you’ll be charged a balance transfer fee with most balance transfer cards – compare 0% credit cards now
- Change current account to one that pays interest on balances or offers a lower interest overdraft – compare bank accounts today
- With interest rates the highest they’ve been since 2001 why not set up a savings account? Compare savings accounts today