The cost of living has risen substantially in the past two decades. Whether that’s the price shift of the weekly food shop or house prices skyrocketing out of reach for many, outpacing the growth of average earnings. In fact, many find themselves allocating a larger portion of their budgets to basic essentials, at the expense of savings or recreational spending.
The gap between the rising cost of living and income demonstrates how important being proactive to plan ahead and supporting your financial future really is. If you can navigate the challenges posed by rising costs and protect your income for unexpected circumstances, you will be positioned in a more secure financial situation.
The cost of living and how its developed over the years
Twenty years ago, the cost of a home was on average £152,464. Whereas in today’s time, according to Sunlife, buying a house will set you back on average around £260,791, that’s almost a double in price!
As well as trying to secure a mortgage, people are struggling to afford rent. The UK Census recorded that the average monthly rent cost in January 2025 is £1,375, up 8.8% (£112) from a year earlier! That’s a significant shift from 2005 where rent was around £55.55 a month.
With rent and house costs increasing rapidly, young adults are struggling to balance their lifestyle with saving to move out. In the mid 90s, over 50% of 21 year olds had already left their family home. Whereas the amount of 25 to 34 year olds who are still living with their parents nowadays, has increased by more than a third according to the Institute for Fiscal Studies (IFS).
Is your wage in line with your spending?
Whilst the average salary has risen and the national minimum wage increases annually, it still hasn’t kept pace with the cost of essential items.
Families find it more and more challenging to make ends meet due to the escalating cost of essential goods while trying to balance of their quality of life (e.g. holidays, dining out, entertainment).
In 2005, the average salary was £22,901. 20 years on it now sits at £34,963, a 52.6% rise. Whilst this seems like a large increase, compared to the 71.05% rise in house prices it doesn’t match up. This results in the majority of households having less disposable income, even as wages increase.
In addition, the cost of household bills has and continues to majorly increase, with households facing a rise in bills. For example, water bills are looking to jump up by £10 more per month on average, as well as a typical amount of gas and electricity going up £111 a year to £1,849 from April, according to the BBC. With growing financial pressures, its essential to explore options on how to safeguard your income.
How to financially secure yourself
With things getting more expensive and wages not matching it, many people fear the risk of missing out on income. You aren’t to know when you are going to fall ill or have an injury, that’s why it’s important to make sure you have some sort of security in place.
Did you know that 1 in 6 adults don’t have any savings to fall back on? Over two thirds (67%) of UK adults surveyed said that they’d struggle financially if they were unable to work, reinforcing how invaluable an income protection policy can be.
Many people often underestimate the cost of income protection, believing it to be more expensive than it actually can be, with 26% of individuals expressed doubts about their ability to afford such products. It’s comforting to realise that it can be affordable, with a variety of insurers offering policies at different rates.
Income protection acts as a safety net, providing peace of mind and financial support in times of need. Up to 70% of your income could be paid out in monthly, tax-free payments, that can help cover all those monthly expenses.
You could use an income protection insurance calculator to estimate how much you need to maintain financial stability. Understanding your financial commitments can help you maintain your lifestyle. This proactive approach enables you to tailor your policy and keep you financially afloat in a time of need.
Ultimately, having the right income protection in place not only safeguards your finances but also provides peace of mind for you and your loved ones
