On behalf of Danske Bank, research agency YouGov recently conducted a survey of more than 1,000 Norwegian adults, on the topic of economics.
In the survey, one in four answers found 2021 to be the toughest year they’ve ever had financially. This corresponds to more than one million Norwegians.
When asked why 2021 is their toughest year, there is no doubt what most people think: As many as 67 percent answer that high electricity prices are to blame.
Of all those surveyed, 31 percent answered that they would face “significant financial problems” in the future if high electricity prices continued.
– I think these are amazing numbers. There is no indication that electricity prices will drop immediately. On the contrary, says consumer economist Thea Olsen of Danske Bank.
In recent months, high electricity prices have set new records. TV2 spoke to a number of Norwegians Struggling with the economy due to expensive electricity. The Danske Bank survey confirms that there are already many who are suffering.
– Families with young and old children are the most privileged – Olsen says nearly 40 percent of families with older children will face major financial problems if electricity prices continue.
For many, higher electricity prices have been an unexpectedly large component of spending in the fall and winter, making a huge impact on the private economy.
The desperation was great, and for good reason, because electricity is expensive. He is merciless, because electricity has to be paid like it or not. There are also very intrusive measures you should take at home if you really want to lower your electric bill, Olsen says.
Consider other savings measures
What attracts the most electricity is heating the house. The consumer economist points out that there aren’t many degrees you have to turn down before you start feeling dissatisfied at home.
Bathing times can be shortened, but if you are a family of four or five people in the house there will be plenty of hot water during the week for showering in general. Olsen says it may take action at home that will lower your electric bill.
She believes that families who are struggling to deal with exorbitant electricity bills should consider some financial measures that are not necessarily related to electricity.
That way, you’ll be better equipped for the time that now comes with higher electricity prices, expected interest rate increases, higher food prices, and higher fuel prices.
Important interest rate
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In the service of the Consumer Council Finansportalen You can compare mortgage deals.
– Electricity prices have affected the news picture in the fall and winter, but we should also remember that higher interest rates are expected in 2022. We already have two rate hikes in 2021, and three rate hikes are expected next year, he says Olsen.
On December 16, the Norges Bank raised its key interest rate from 0.25 percent to 0.5 percent.
There is a great deal of uncertainty about the future course of the epidemic and its effects on the economy. But if economic development is about as we now envision, a further rate hike is likely in March, Central Bank Governor Austin Olsen said after the decision.
Thea Olsen has prepared an example showing how much a recent interest rate increase and three more interest rate increases can mean your mortgage expenses.
– If you have four million kronor loans, and the interest rate increases three more times in 2022 by 0.25 percentage points each time, you can expect your interest expense to increase by 40,000 kroner per year, before taxes. That’s roughly 3,300 NOK a month, Olsen says.
Many Norwegians have more than four million loans, so this amount can be much higher for them.
– Then it is important to emphasize that these are purely additional expenses for the family. This interest expense is added to the interest you are already paying today.
what you can do
High electricity bills have forced many to take the time to become familiar with the electricity bill. Olsen wishes Norwegians would spend the same amount of time cleaning up their personal finances.
I think a lot of people don’t realize how much money they can save by making a few simple moves with their finances, says Olsen, and lists several points:
- Negotiate Your Interest Rate – If you negotiate your interest rate a little, this could amount to significant amounts of interest expense saved.
- Stop being a gym membership if you’re an “auxiliary member” and can train in an alternative way.
- Review your subscriptions – Are you paying for streaming services you don’t use? delete it.
- Weekly Shopping – Stop by for the little shopping spree. Impulsive action increases the likelihood of spending more money than intended.
- Clean up your insurance policies. Don’t take out disability, life, or child insurance, but check to see if you have enough coverage. But get an overview of your other insurances. You may be covered by your employer in some insurance policies and also pay for the same policies privately. Then it may be possible to cancel these locks.
- Fuel is expensive. Track prices and replenish them when fuel prices are low. They range from 15 kroner to 19 kroner per liter.
They must take action now
Among those surveyed who think 2021 was their toughest year financially, 14 percent answered that this was because they were laid off from their jobs. 11 percent say the reason is that they have been fired from their jobs, while 30 percent say the interest rate hike is the reason.
17 percent answered that the new measures against the Omicron variant make them worried about their finances.
– Despite nearly two years of coronavirus restrictions, many Norwegians have come out of the pandemic and are financially strengthened. Admittedly, some of those who have lost their jobs, are going through an extra tough time. Olsen says the vast majority of us have a thicker portfolio than they did a year and a half ago, as a result of record low interest rates and lower consumption.
Figures from Danske Bank show that Norwegians have saved a total of NOK 120 billion through the pandemic. Now, however, uncertain times await, including increased layoffs and sky-high electricity prices.
Those who live on the edge of what their finances can handle must take action now. We need to get better at saving, and create good buffer accounts that are ready to strike when unexpected expenses arise. I think more people have gotten complacent about the importance of a good buffer account lately, says Olsen.
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