The cost of living squeeze will get stronger in April as households face soaring bills on top of a 1.25 percentage point national insurance hike to help pay for health and social care. The state pension and some benefits will be uprated by 3.1% in April – but inflation could hit a 40-year high of 8.7% in the fourth quarter of 2022, according to the Office for Budget Responsibility (OBR).
Here are some ways people could try to ease some of the squeeze on their finances:
1. Use free budgeting tools
Get on top of your outgoings so you can cut back on any non-essentials. The Money Helper website has a free budget planner tool you can access here.
Eleanor Williams, a finance expert at Moneyfacts.co.uk said: “Sitting down and having an honest look at monthly finances and making a simple income and expenditure breakdown could reveal some areas where it might be possible to reduce outgoings. There are some free apps that can help with this.”
2. Go through bank statements
Look to see if there are any subscriptions you could do without. You may need to go back a year to find any annual charges.
Myron Jobson, senior personal finance analyst at interactive investor, said: “Sharing streaming subscriptions within your household can also be a cost-effective way to save money. Most streaming services allow users to create separate accounts that can be personalised based on your preferences.”
If you want to keep your subscription, Mr Jobson suggests looking at annual options to see if this would be cheaper in the long run.
3. Make savings on food
Mr Jobson said: “Even simple things such as opting to purchase a store brand equivalent of traditional larder products can help to cut down the cost of groceries.” He added: “It is also worth taking advantage of supermarket loyalty schemes, such as Tesco Clubcard and Nectar card, which can give you access to unlock big discounts and other exclusive rewards.”
4. Look for a better broadband deal
Mr Jobson said: “If you’ve been with a broadband provider for a while, it is likely that any introductory offers will have expired, and you might be paying more than you need to. Shop around to see if you can get a better deal.”
5. Could you go Sim-only with your mobile?
Mr Jobson said: “If you are happy with your current phone, then stick with it and move onto a Sim-only deal.” He added: “If you’re wedded to getting a new phone, be sure to shop around for the best deal. It might be cheap to buy the handset and get a Sim-only deal separately than to opt for a package deal. Also, when it comes to usage, only pay for what you need. There is no point paying a premium for data you won’t use.”
6. Could you switch to a cheaper mortgage?
Mortgage payments are often a household’s biggest monthly outgoing, and Ms Williams said some households may find they can save hundreds of pounds a month by moving off their standard variable rate (SVR). She said that while mortgage rates have been rising, "those who are sitting on the current average SVR of 4.61% will find that the average two-year fixed rate of 2.65% is still almost two percentage points lower".
7. Cut the cost of debts
Moving debts to a 0% interest balance transfer card could help some people, but check any transfer costs and also make a note of when the interest-free period ends. Ms Williams said: “Anyone with existing credit card debt might want to check if they are on an interest-bearing card and, if so, may want to look at moving to a 0% balance transfer card, if possible.
“Consolidating existing debts could make it easier for consumers who may be struggling with various outstanding commitments.”
8. Get cash to switch current account
Ms Williams said NatWest is set to withdraw its £150 free cash offer on April 7 while Nationwide is offering switchers up to £125 and first direct is offering £150 to switch or £20 just for opening an account and logging into online banking. She cautioned: “Customers may be better off by picking an account with a package of benefits instead of choosing an account for its up-front perk, and it’s important to remember that incentives are only worthwhile if consumers make good use of them.”
9. Club together with other parents
Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said: “Families can save a small fortune by chatting to people with children of a similar age and working out a hand-me-down circuit.
“You’ll get free clothes when a friend’s child outgrows them, then you can pass them on down the chain when your child gets too big for them. Not only will you save money, but you’ll keep clothes out of landfill too.”
10. Could you put more money in your pension?
If you can afford to, putting more money into a pension is one way to boost long-term savings – and the contributions benefit from tax relief. Mr Jobson said: “The impending hike in national insurance (NI) contributions has bolstered the allure of employment salary sacrifice schemes, as they can be used to offset the rise.
“This arrangement allows employers to reduce employees’ salary and pay the equivalent amount into a non-cash benefit such as pension contributions and a cycle to work scheme. Think of a pension as deferred income and this seems like a good way to reduce your overall NI bill without reducing your income, if you are happy to take it after age 55 instead.
“These benefits reduce the NI payable by the employee as well as the employer. However, a lower salary can affect entitlements such as maternity/paternity pay, mortgage applications based on one’s income and some state allowances. As such, people should always consider how such benefits could impact their finances more broadly.”
11. Could you challenge your council tax bill?
Ms Coles said if you think your valuation is incorrect, you could try to challenge it, but “it’s worth being aware that challenges can be denied, or can mean the valuation is raised instead of lowered – along with your bill, so do a bit of homework before you try it”. She highlighted this MoneySavingExpert guide aimed at residents in England and Scotland.
12. Finally, get help if you are struggling
If you cannot afford to keep up repayments on a mortgage or loan, speak to your lender as soon as possible. They may be able to offer alternatives and the earlier you try to sort the problem out, the wider the choice of options there could be. Breathing space schemes are available for people in problem debt and it is also worth checking all the benefits and rebates on bills that you may be entitled to.
If you are sinking into problem debt, or worried about doing so, consider getting help from a charity such as StepChange, Citizens Advice, the Money Advice Trust or Christians Against Poverty.
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