As energy bills rise and the cost of living soars, many of us are having to make sacrifices for the first time in order to make ends meet. But cutting back on the things we love can have a detrimental impact on our mental health.
To help us out, Martin Lewis has issued advice on how to cut back on certain luxuries while looking after your well-being. Speaking on his BBC Radio 5 podcast, Ask Martin Lewis, the finance guru said the key was to make "rounded decisions" about your spending priorities.
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The 49-year-old explained the best way to budget. He said: "The first part of doing a budget is to work out what you spend...If your spending is more than your income, the job is to reduce your spending so it's less than your income or the same as your income. It's not possible for everybody because of the cost of living crisis, but it's possible for many.
"The next thing you do is you look at what I call 'pain free' saving. Pain free savings are what can you do and get the same as you are now but pay less. [For example] 60 million people are out of contract on their broadband and mobile phone bill and most of those people could halve what they pay each month and get the same if not better than they do right now.
"Then you go back to your budget and think, 'have I done the pain free savings and am I now balancing the books?' And if the answer to that is no, then we have to start 'painful' savings. Panful saving involves cutting back. Painful savings involve having a lifestyle change where you're going to have an impact on your lifestyle."
Although he doesn't want to ask anyone to cut back, Martin said that with the current state of the economy, many households on low to middle incomes are going to have to start painful saving. It might be the first time many people have had to implement these savings, so it can be difficult to know where to start if you spend a lot of your money on hobbies and luxuries. You can get more money news and other story updates by subscribing to our newsletters here.
He suggested: "Write down those luxury spendings and then rank them. Put the one that's most important to you at the top, the one that's least important to you at the bottom and all those left in order. That prioritisation game [crystallises] in your head what your financial priorities are."
In preparation for the show, Martin asked fans on Twitter, "What is the one luxury you wouldn't cut back on and why?". Many responded with simple - but sometimes costly - hobbies which would harm their well-being if stopped, such as having a warm evening bath.
Martin read out some responses during the show, including one from his personal researcher, Peter. Peter wrote in and replied: "Speciality coffee. Original brand instant coffee from the supermarket is around 4p a cup. I get whole beans delivered at home from small, independent roasters. This usually works out around 60p a cup - 15 times more than instant. I drink at least two cups a day and working out the cost over a year that's over 400. It's quite an extravagant luxury though still cheaper than takeaway coffee. But the coffee is delicious and learning about different brewing methods and experimenting has become a hobby for me so I'd really struggle to give it up."
Another listener said: "My cat. She's an old rescue with a lot of health problems so in between insurance, medication, prescriptions, food and vet bills she's really expensive. Everything else is dispensable to some degree." While another added: "Cheese. I'm always picking up different types. I love it but I don't need it."