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Finding ways to cope with the cost of living crisis

If you’re worried about the rising costs of energy, food, housing and bills, you're not alone.

From April 1st, energy bills will increase by an average of almost £700 a year. Council tax is going up, while inflation has hit a 30-year high and is expected to reach about 7.4%. Millions of people in the UK are struggling to cover essential living costs. With prices increasing so suddenly, it can be difficult to know what changes to make to curb the impact.

The debt charity StepChange suggests three steps for reducing the impact of the crisis on your finances:

Let’s look at each of those in more detail.

1. Making a budget and understanding your priority bills

🗓 How to make a budget

A budget basically involves working out your income, working out your expenditure, and calculating the difference. Learn how to make one with our guide:

You may already have a budget, though we recommend revising it in light of the rising living costs; you’ll probably find that with larger portions going towards bills like energy and council tax, you’ll need to identify other areas where you can cut back.

Once you have made your budget, it’s a good idea to have a plan for how you’ll spend your budget for the month. The guide below explores different budgeting styles which you might find useful and suggests some apps that can make your budgeting easier:

🔢 Understanding priority spendings and how to prioritise debt

It’s important to know which your priority spendings are, since some bills will have greater consequences if you don’t pay them versus others.

StepChange have created a table which lays out the consequences of not paying certain bills for people living in England, Wales, Scotland and Northern Ireland.

You can also check out our guide on How to Prioritise Debt if you have multiple debts and are unsure which to pay off first. This guide explains how to categorise debts into debt emergencies, priority debts and non-priority debts.

😕 What to do if you’re worried about falling behind on payments

It can be scary falling behind on payments, but there is help available. The first thing you should do is contact your creditor to let them know that you are struggling to make the payments. Get clued up on your budget and share this with them so that they can understand what you can or can’t afford.

You might find it helpful to seek free, impartial debt advice. We’ve made a guide here explaining what it is and where to find it:

2. See if you can increase the amount of money you have coming in

🧐 Check for benefits and grants

You should claim all the rebates and benefits that you are entitled to. The anti-poverty charity Turn2Us have a useful benefits calculator.

❤️ Use the Household Support Fund

The government has announced an increase from £500m to £1bn in funding for the Household Support Fund and has extended the original 31st March deadline. Eligible applicants will receive help with payments towards essentials such as food, clothing and utilities. To apply, you will need to go through your local council, either on their website if they have set up a link or by enquiring over the phone. You can enter your postcode here to find out which council you live in:

✅ Check that you’re paying the correct amount of council tax

From April 1st, millions of UK houses will see their council tax bills rise by around 3%. You can check whether you’re paying the right amount by following this guide from Money Saving Expert:

🏠 Claim the council tax rebate if you are in council tax bands A to D

The government is offering a £150 council tax rebate for households in council tax bands A to D. That’s 4 in 5 households.

Your council will confirm how the rebate will be paid in your area. If you pay via direct debit then it will go directly into your bank account. If you do not pay via direct debit, your council will confirm how the rebate is paid to you.

⚡️ Claim grants from your energy provider

The Warm Home Discount is being expanded, so almost 3 million low-income households will now be able to access a £150 discount on their energy bills.

There are various schemes run by energy suppliers and the government that could help you with your energy bills. Check them out in our guide below.

The government is also taking £200 off your annual energy bill, which you will repay over the next 5 years. This is not a debt, no interest is charged and no credit ratings will be affected. You cannot opt out of this discount and it will be repaid automatically so you don't need to do anything.

🤩 Claim tax relief if you worked at home due to covid, even for just a day

If your employer requires you to work from home, you have always been able to claim tax relief. This is due to the increased costs that you incur from things like heat and electricity. In the first 2020 lockdown, HMRC launched a microservice which allowed you to claim for an entire year of tax relief, even if you only worked at home for one day.

This tax relief applies to the tax years 2020/21 and 2021/22, so if you worked at home before 5th April 2021 as well as after that date, you can claim two years’ relief. For most people, employers will pay you an extra £6 a week tax-free (earning you £62.40 extra a year if you are a 20% rate taxpayer, £124.80 if you are on 40% and £140.40 if you are on 45%).

The service is still running, though will potentially close soon so we encourage you to act quickly on this.

💸 Pay off debt

Paying off debt will free up your disposable income. If you are unsure how you will be able to pay down debt, you might like to consider free debt advice.

3. Look at ways to reduce your spending

🧮 Reshuffle your budget

Even if you already have a budget, it’s probably a good time to go over it and identify areas where you can cut back. Maybe you have a TV subscription you don’t use? Perhaps you’re spending more than you need to on clothes? Think about what you want versus what you need and aim to cut down on unnecessary spending.

💡Cut down your energy usage

Read our guide on how to reduce your energy bills. If you follow all the steps you could save about £229 a year on energy.

🍳 Be savvy with your food shop

You should never go without food, but there are ways to make your food stretch for less money.

Think about ways you can shop smarter; it might help to make a list of what you’re going to buy before shopping so that you’re not tempted by unnecessary items. Check what items you already have - could buying another item help it to stretch further?

Think about recipes that require cheaper ingredients. Jack Monroe runs a website with cheap eats called Cooking On A Bootstrap which has loads of great recipes complete with how much it should cost.

You could also try downloading apps like OLIO, where you can pick up free surplus food from your neighbours, Too Good To Go which allows you to rescue food at discounted prices that would otherwise go to waste, and nosh which allows you to track expiry/use-by dates for items in your fridge, create shopping lists and plan your meals accordingly (complete with recipe ideas).

If you can't afford to pay for food, find your local food bank. Trussell Trust is the largest food bank organisation in the UK - you can use their website to find your nearest food bank. You usually need a referral to use a food bank; find out more on Citizens Advice.

🕺 Have fun for free

Spending time with friends and loved ones is important for your wellbeing. It can be very restrictive feeling like you’re constantly penny-pinching and not able to participate in society as you’d like to, but there are ways that you can balance a social life with a budget.

You can often find free events on Facebook or on your local council's website. Try thinking of ways that you can socialise with people for free; you could go on a walk, watch a film at home instead of going to the cinema, cook together instead of eating out, or go to a bar with live music instead of paying for a gig.

StepChange have a useful guide on saving money on your social life.

Don't hesitate to reach out for help if you are struggling

This is a difficult time for many people, but there is help out there.

If you are worried about money, we suggest getting in touch with companies like StepChange, Citizens Advice and National Debtline.

If you are struggling with mental health, Mind have lots of useful resources and Samaritans National Helpline can help people in emotional distress.

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