Recently, I received a pay rise at work. While this was undoubtedly cause for celebration, I don’t feel I’m reaping the benefits as much as I would expect to be. Recent research is suggesting I am not alone in feeling like this. Here’s why.
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Why my pay rise didn’t feel like a pay rise
I was lucky enough to be given a 12% pay rise. This is a substantial increase in my monthly pay. But my bank balance is not looking any healthier for it.
In between rising energy costs, fuel price increases and food price hikes, it feels as if the extra money is being eaten up before I get a chance to enjoy it.
Filling up my car with petrol now costs me £57. It never used to cost me more than £45. This means the cost of fuel alone has gone up by 27%.
Meanwhile, I’m seeing the cost of my food shop creep up on an almost weekly basis. Each increase may be negligible – 50p here or there – but added up over time, it is starting to make a real dent in my budget.
Of course, I am better off than if I hadn’t had the pay rise. If I had remained on the same pay scale, I would be feeling the price increases far more acutely than I am now.
However, I have no more money left over each month after all my expenses have been paid than I did before my pay rise. If anything, I have less money available to save or invest.
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How other people are coping
It seems I am not alone in ending up with less money each month – with or without a pay rise.
According to a recent report from the Office for National Statistics, two-thirds of people (65%) say their cost of living has risen in the past month.
The most common reasons people gave for the rise was an increase in the cost of groceries (87%), an increase in energy bills (77%) and an increase in fuel costs (76%).
Electricity and gas prices increased by 8.7% and 17.1% respectively during November, and they’ve gone up 18.8% and 28.1% in the last year.
At the moment, people are doing a good job of managing these higher costs. Only 16% said they had to borrow more money or use more credit than usual in the last month. This is actually down from 18% in October this year.
What the experts have to say
Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, says: “The spending squeeze is crushing two in three people.”
She explains middle-aged people are feeling the pressure as they tend to have more people living in their homes, meaning more mouths to feed: “It’s far harder to keep costs under control when there are more people making more decisions that affect their energy use.
She goes on, “If you have children at home who take ages in the shower, leave doors open and insist on higher temperatures, the costs quickly mount.”
Coles also warns that “in many cases, the full impact hasn’t hit yet.” She explains that those who are on fixed-rate energy deals have been protected from the rises so far. While those on variable deals have protection from the energy price cap.
She explains, “The full impact of the price rises will only really be felt in April when the energy price cap rises. At that stage, the spending squeeze is going to be even more painful for millions of us.”
