Your pay rise should at least keep pace with - and preferably exceed - the rising cost of living.

The fact is that the cost of living regularly rises beyond the rate of inflation and living standards suffer as a result. Below is an example of increases:-

• On 1st January 2011 the government increased the VAT rate to 20%, an increase of 2.5%. This means that from 1st January 2011, the cost of most goods and services increased by a minimum of 2.5%, having also increased by 2.5% at the beginning of 2010. It will cost the average household £275 a year. Lower income households pay a higher proportion of their income in VAT.

• Grocery prices continue to rise, price of tea increased by 3.8%, milk by 2.6%, butter by 3.1%, and bread by 2.2%, cereals by 2.5% and beef by 3.5%.

• Utility bills also continue to rise. In the last 12 months the cost of gas increased by 6.4% and cost of electricity increased by 4%;

• Housing costs continue to rise; the average UK home now costs £232,628. The price of houses in Greater London has risen by 7.5% over the past year to an average price of £437,062.

• Cost of childcare is continuing to rise. Typically, families requiring childcare would have to earn over 20 per cent more in 2011 than in 2010 to meet the shortfall.

• Impact of Public Spending Cuts resulting in Child Benefit frozen for 3 years – costing families; for the first child: around £50 in 2011, £100 in 2012 and £150 in 2013; for each other child, they lose £35 in 2011, £70 in 2012 and £105 in 2013.

• CPI not RPI increases; from April 2011 all benefits and tax credits will increase by CPI which is predicted to be 1.3% - 2% lower than RPI.