The energy price cap in the UK went up yesterday to over £3,500 a year. Discretionary income is the income that we have left after we have paid for all the essentials like food, shelter, energy, water and communications. After this cap comes begins in October many people will have no discretionary income. People on the lowest incomes obviously need support from the government. Many on the lowest incomes and mean-tested benefits have already had several payments and everyone got the £150 payment earlier in the year.
The main reason for this high inflation is the high price of natural gas. Is this a permanent high price or a spike in the price of natural gas? The government should ask that question and so should every employer in the UK. The government has been giving out one-off payments which will suffice if this is a spike in inflation and doesn’t get embedded. However, we can see that there are signs that inflation will become embedded as we see more and more workers striking for pay rises. Workers at Lloyd’s Banking Group were given a one-off bonus to cover this year’s rise in the cost of living and Rolls Royce workers were offered a bonus too. That was a sensible way to go. Unfortunately, we have a zombie government and no leadership or a good leader would have encouraged other companies to follow that lead.
I am expecting my discretionary income to fall but I have investment income that will add to my discretionary income so expect to weather this financial storm quite well. I have my car insurance and breakdown cover coming up in a few weeks. I pay them yearly because it works out cheaper than monthly. The premiums are good this year because the insurance industry is more competitive. I have a few dividends from my investments to help pay those bills. I recently bought shares in Natwest and they are paying their interim dividend and a special dividend this month. I bought it just before they went ex-dividend so that was lucky!
Not having enough discretionary income can mean missing out on those little luxuries. We are all creatures of habit and my habits include not wasting anything and watching the stock markets every weekday. I don’t buy expensive takeaway meals. I cooked a Chinese meal in 15 minutes yesterday and it was delicious and very cheap! It was still cheap if I count the two glasses of Chardonnay I drank with it! This winter I might have to be even more frugal with energy but I have started monitoring it and considering where I can save without giving up my comfort. I do waste hot water so I’ll start with that.