Joyce Fegan: Making cents of the cost-of-living crisis

"The rise in unseen financial demands is really here ... and this week it arrived with a thud"

Sat, 10 Sep, 2022 - 02:00

Sharing bath water, vigilantly turning on and off the heating, strategically missing light bulbs, politicians preaching about said vigilance, and only using the big ticket household devices after sunset.

This isn't a nostalgia-inducing episode of Derry Girls. This is now.

The "cost of living crisis" catchphrase, much like the "squeezed middle" tagline of the recession, has been clawing its way into our speech for months now.

A throwaway comment in a WhatsApp chat here, a shop corner conversation there, the "rising cost of living" was closing in on the weather for top dibs in our small talk stakes.

What some had naively written off as media panic and the next big serial story, or the background political noise that populates your kitchen or car radio's news headlines, the rise in unseen financial demands is really here.

This week it seemed to arrive with a thud.

On Thursday, the European Central Bank (ECB) raised its key interest rates by 75 basis points.

The bank has promised further hikes; what used to sound distant, far-off-in-Frankfurt news, is hitting home. Literally.

Rising costs of mortgages

One friend's mortgage, on a small house far from any metropolis on the island of Ireland, is now costing them an extra €120 a month. So far.

These decimal-point percentage increases in interest rates will take a large chunk of unforeseen cash out of many mortgage-holders' monthly pocket.

But those Frankfurt-originated rates are not the only issue. There's the energy crisis now too — the cost of gas and electricity.

Provider after provider, in a kind of domino-like procession, have come out with their price-hike announcements.

This week Energia took its place among the elements, announcing its electricity unit price hike of 33.5% and gas unit hike of 47.11% from October.

Those percentages turn into hundreds of euro being taken from your wallet over the coming months.

So that's mortgage rates, which affect both homeowners and in-the-dark renters, and the cost of energy now too.

They say inflation is now at a half-century rise, and while it's all starting to sound a bit jargony, like the lingo of the last financial crisis, it means that there is a major increase in the price of goods and services across the board.

My local supermarket is killed sending me emails with my money-off vouchers as if they're personally giving me a helping hand in all of this.

One of the reasons I shop with them is because they've always given these money-off vouchers; it's not that they're giving me any more of them, or any more money off, they're just telling me about it.

As the cost-of-living conversation casually crept into the mainstream these last few months, I've been a diligent daughter of the 1980s.

I watched as my litre of milk went up by 29c, this week I spotted the price of the cheese we buy has increased by exactly 10%.

Outside of the supermarket aisles, friends who drink coffee tell me their caffeinated treat is closing in on €5.

One sleep-deprived mother of two under two, is paying €4.80 for about 250ml of milk and some ground coffee to go.

You'd get a bag and a half of chips for the growing price of a takeaway coffee, but her coffee is her one indulgence.

But while it's conversations about the price of takeaway coffee for some, the rising cost of living has long hit some people already.

Demand for St Vincent de Paul services

Earlier this month St Vincent de Paul (SVP) said it received 30 calls an hour from parents unable to meet the full cost of sending their children back to school.

There was a 20% rise in demand compared to the same time last year.

The problem was exacerbated by the general pressure on the overall household budget, mostly felt by one-parent families.

There was one day in August that SVP took 450 such calls.

The charity has said before that their clients are some of the most efficient budgeters, knowing where every red cent is coming from and going to, because they have to be, there is no other alternative.

What happens is though that one unexpected expense takes a swipe at the carefully-managed house of cards.

For everyone, from young families to pensioners, it's the unexpected expenses, the unplanned increases in mortgage repayments, energy costs, and fuel prices, that will rattle even the most efficient and organised of household budgets.

The political advice has ranged from using your car less to reducing your energy use in the home at peak times.

There was also a suggestion to shop around, to "move around" to get better prices.

It's unlikely that shopping around for savings of 29c on my litre of milk is going to make the greatest dent in all of this.

What will happen though is a knock-on effect.

As the increase in interest rates hits some mortgage holders and as the increased price of energy beds in, consumers are going to be a lot more conscious of their cash come Christmas.

The links to Santa visits and Halloween pumpkin patches have been doing the rounds since the schools went back, for the average family Christmas afternoon out it's costing anything between €60 and €80.

Then there will be the presents to buy and the dinner to be got. That large expense is ahead of us all, after our so-called winter of discontent.

Even those without mortgages, or those with more leeway, have household budgets they plan and hope to stick to.

Finite resources of pensioners

There are many people too with finite resources, pensioners who can't take on nixers, whose homes are heated by tanks of oil, who have a pot of definite cash that has to do them for life.

For the vast majority of us, our cash is accounted for. Unexpected expenses knock it all off.

There is much stereotyping and prejudice when it comes to those who experience poverty, that they were bad with their money or acted irresponsibly.

Those who work in the area point to the opposite — it was an unfortunate life event like an illness that knocked them out of financial kilter.

Almost all of us will now know what it feels like to be in the grasp of these unexpected expenses.

Did you diligently budget for an extra few hundred euro to be leaving your annual household budget?

Do you even have a clear household budget, a shared document that says what's what?

While shopping around or using less energy at dinner time might be the advice from some quarters, taking a new look at your monthly money and upcoming expenses like Christmas might, if nothing else, help make some sense of all of this.

Any hopes slowing economic growth would reduce rate hikes have now been crushed