How To Manage Your Finances During A Cost Of Living Crisis
2023 was a tough year for everyone and it looks like 2024 isn’t going to be any better in the UK. Whilst inflation is going down now, it has risen so sharply that the cost of everything is around 10%-20% higher than it was only a year ago and add to this that wages haven’t gone up at the same rate means that people are much worse off than they were previously. We’re going to take a look at some ways you can look to improve your finances during a time like this and also what to do if you are struggling and find yourself in debt. You should never ignore debt, it doesn’t go away, it only gets worse so we’ll take a look in to things like a DRO (Debt Relief Order).
Analyse Your Spending Habits
It seems obvious but many people don’t properly look in to what they actually spend money on, they tend to look at the big things like mortgage payments, energy bills and the weekly shop but miss things like Netflix subscriptions, daily coffees and alcohol. There are quite a few apps that you can use now that categorise your spending in to different sections so that you can easily look at the end of the month what you have spent your money on. As we’ve just mentioned, even something as simple as buying a coffee from Starbucks each day can add up to £20 a week which is almost £1000 per year. A big hidden spending habit for many people at the moment is subscription services. Due to the way this industry has gone, people now find themselves paying for 4 or 5 different subscriptions which alone don’t cost too much but when they are added together they end up costing a lot. If you’re paying for Netflix, Amazon Prime, Spotify and Disney+ then you’ll be spending the best part of £100 per month. Therefore, through cutting out a daily coffee and a some subscriptions you could be saving £2,000 a year which would be more than enough to make up for a 10% increase in shopping bills or energy prices.
Use High Interest Rates To Your Advantage
High interest rates are generally bad news for most people, the cost of borrowing money, whether it’s a mortgage or a credit card or a loan is far higher. However, on the other hand the interest paid on savings is also much higher. There are currently easy access savings accounts that allow you to deposit or withdraw whenever you like paying close to 5% interest. If you have any extra money lying around in your current account, put it in to a savings account instead. By having £5,000 in a savings account paying 5% interest you would generate £250 per year which is a good chunk to either put towards a holiday or any emergency purchases you may need to make.
What To Do If You’re Paying Out More Than You Earn
This is a scary position to be as you will find yourself getting in to more debt with higher interest payments each month. Look in to meeting a financial debt advisor who can advise you on options to reduce your monthly repayments by freezing interest and coming up with a method to pay your debt off. There are options like Debt Relief Orders, Debt Repayment Plans and IVA’s which can all help you in achieving affordable monthly repayments on your debt.
