Career Testing
Career Testing
Career Testing
WORK-LIFE BALANCE / MAY. 31, 2014
version 5, draft 5

The Cost of Living Crisis and the Importance of Financial Independence

With a general election looming, the time has come for each political party to campaign vigorously on a selected social issue that touches the voter’s conscience. Labour’s cause of choice was the so-called ‘cost of living’ crisis, which according to leader Ed Miliband was the result of the coalition government’s austerity measures that have hit average and low-income earners.

The leader of the opposition has been forced to change his stance in recent times, however, after initially claiming that these measures were driving the country to the brink of a new recession. Now that this argument has been disproved, he has suggested that the government’s policies are in fact placing a strain on typical households and leaving them with a lack of disposable income.

A Red Herring: The Truth about Income and Individual Responsibility

With the bank of England governor Mark Carney now adamant that wages throughout the UK will grow strongly in the months ahead, Labour’s campaign is facing ruin. Pay rises are currently matching inflation and likely to rise further in the next quarter, as the recent economic growth will finally begin to impact on households nationwide. If anything, this exposes Labour’s initial claims as being extremely inaccurate, as they completely ignored the truth about economic growth and the often gradual pace of recovery.

On an even more fundamental level, however, it raises the question of individual responsibility and the need for financial literacy. While it suits political parties to blame the opposition for creating a perceived cost of living crisis and allowing inflation to rise at a disproportionate rate to wages, these are all economic factors that every conscientious citizen should be aware of. By developing an understanding of these and following economic trends as they unfold, there is no reason why we cannot execute sound financial decisions that help us to protect our hard earned capital.

How to Combat the Fluctuating Cost of Living in Practical Terms

The fact remains that the cost of living is continually fluctuating, although it often rises at a disproportionate rate to the average national wage. It is therefore wise to be prepared for such an eventuality, either by focusing on reducing everyday household costs or increasing your earning capacity. While the former may seem easier in that it only requires an effective, real-time budget and a willingness to use promotional codes or vouchers, it is the accrual of additional income that will ultimately have more noticeable results.

One of Labour’s most credible points suggested that the existing job market is short of long-term and well-paid opportunities. While this is true, this can actively be used to your advantage as you look for part-time or freelance work to supplement your income. Thanks to technological advancement and the continual sophistication of real-time communication methods, you now have access to a flexible employment market that caters to a wide range of working methods. If you have a marketable skill and experience within a particular field, it is possible to earn considerable income as a freelancer while also retaining your regular job.

Why the Cost of Living Demands Individual Responsibility

This is the ideal example of taking individual responsibility for your finances, as you have recognised a potential shortfall in your disposable income and take steps to address this imbalance. Such an outlook is crucial if you are to achieve your long-term financial goals, especially at a time when the economic climate remains so changeable. So although Ed Miliband failed in his attempt to use the cost of living as a way of criticising his political peers, he did raise a pertinent point in relation to how it should be dealt with.

Remember, while a government is responsible for its subjects it has little control over the private sector and wider economic factors. It must also make difficult decisions with the countries long-term well-being in mind, and this may occasionally create periods of difficulty and austerity for citizens. In instances such as this, voters must remain strong and take responsibility for their own financial decisions, and aim to cultivate behavioural patterns that will help them to make the most of their money over time.

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