Preparing for the cost of living increase
The cost of living is going up for all of us. Roni Marsh, money advice team leader, explains what this means in reality and shares some steps that everyone can take to try to get our finances in order to prepare for its worst effects.
The energy crisis is in the news a lot at the moment. How will this impact us?
Energy rises are going to take effect from 1 April with a headline rate of a 54% rise in the gas and electric price cap. This means someone with a typical bill (which is what the price cap is based on) will see their bill rise from £1,277 to £1,971 per year. That’s from £106.42 to £164.25 per month, an increase of nearly £60 per month for the average household. For someone who’s only just getting by, that’s a lot of money to have to find.
What else is going up?
There are also other price rises going on at the same time which is reflected in the consumer price index which has increased by 6.2% which is a 30-year high. The price of petrol and diesel as well just seems to be going up daily. A lot of people will find things very difficult financially from April if they aren’t already.
Is there anything we can do about it?
There aren’t any easy ways to save lots of money and people have been cutting back already. However, there are lots of little things that we can do to prepare our finances to be the best that they can be. Taking lots of little steps to reduce expenditure and offset some big increases is a good way to do this. The first thing to do is to take a look at the major bills: rent, gas, electric, water, mobile phone and broadband.
Rent – There is not much you can do to reduce your rent quickly. However, according to Martin Lewis, there are about 1 million people in the UK not claiming the benefits they are entitled to so it may be that you can increase your income that way. He recommends using the benefit calculator to check this out if you, either as a single person or as a household, have an income of under £30,000. You can use www.turn2us.org.uk to see if you are eligible for benefits to top up your income.
Gas and electric – You must make sure to read your meters (and submit the readings) on 31 March (National Meter Reading Day) to make sure that you are only paying a higher price for energy you use after 1 April. We used to advise people to switch suppliers to save money; there are no deals on switching now but you should check if you can get a better deal with an existing supplier.
Water – You should find out if you would be better off with a water meter or not and change accordingly. You can do that on the online calculator. According to moneysavingexpert, the general rule is ‘if you have more bedrooms than people or an equal amount of bedrooms to people, you will be better off on a meter’. This obviously is not the case if you are a major water user such as a lot of baths or long showers.
Broadband, Home Phone, TV Packages, Mobile, Insurance, Bank Account – You can check to see if you can get a cheaper deal by switching suppliers for all of these. If you don’t want to switch you can check with your existing provider to see if they can offer a price match. There are lots of comparison websites to help you, but whichever one you choose, you should make sure it’s OFCOM accredited.
Finally, check your bank account to make sure you’re not paying any unnecessary bills through subscriptions you’ve forgotten about. A lot of people take out gym membership but don’t use it or pay for TV channels they only watch occasionally. It’s important to only pay for things while you actually need them.
Once you understand where your money is going, you can budget for everything, and if you’ve got enough you can put some aside as savings.
Where can I get more advice?
Moneysavingexpert.com runs a free course called the MSE Academy of Money that you can sign up for to find out more. It covers budgeting and good spending and saving decisions amongst other topics.
What if I need debt advice now?
If you need advice, you can contact us here and we can offer you a free appointment with one of our money advisers. We also run a special crisis navigation service for people who are behind on their rent or mortgage.