Figures released this week by the Bank of England and the ONS (Office of National Statistics) show that families in the UK are suffering more than ever under the weight of financial insecurity.
With inflation set currently at 5.2% and wages largely stagnant, households have reached their highest average debt levels since the height of the recession in May 2009. With the cost of living rising at over twice the targeted Government level, families are struggling to keep up with mounting household bills, retail prices and falling wages and job losses.
The future for the average family in the UK looks bleak to say the least; so what can you do to try stave off the bailiffs and keep your head above water in such uncertain times? Our top ten-guide to reducing debt and becoming more financially savvy will help you to take a step back from your problems and hopefully find a way through to the other side.
- Budget, Budget, Budget:
We can’t say it enough or loud enough. Time spent on doing a household budget every month, week or even day will save you hundreds on unnecessary spending. Remember the three Rs –
- Realistic – When planning your budget you need to include EVERYTHING, even the interest on an overdraft or loan
- Relative – Is your budget suited to your income? If not, it’s time to change one…or the other
- Reassess – A monthly budget WILL change! You mustn’t assume that what is a sensible budget one month will be appropriate the next. Keep an eye on monthly bills and adjust your budget accordingly
2. Use Credit to Your Advantage – Not The Banks!
Most opinion of credit is that it is a necessary evil, but it doesn’t have to be. By using available credit to your advantage and not allowing it to control you will not only save you hundreds of pounds but also send a clear message to the banks that consumers are savvy, switched on individuals who can play them at their own game.
- SWITCH to a cheaper product – there is no benefit in being loyal
- Use 0% interest deals for their duration and then guess what?? You’ve guessed it…SWITCH!
- Pay your bills on time, every time. By missing a payment or making a late payment you are arming the banks with the information they need to take away a special rate or deal
3. Need or Want?
If 20% or more of your household net income is going to pay off debts every month then it is time to act now, not later. Before you buy ANYTHING, ask yourself do you NEED it, or do you WANT it? If the answer is one of NEED, then make sure you do your research and buy it for the least amount of money possible – better still – get it for free or second hand. It may sound obvious but spur of the moment purchases can make that crucial difference between a household living within its means and over-spending.
4. Spend the REAL money rather than FUNNY money…
It’s painless, quick and easy to buy something using a debit or credit card. Banks weren’t ignorant of this fact when they came up with the idea or when they introduced chip and pin as a means of authorising.
A payment that comes with less emotional pull is easier to make and if it’s easier to spend your money, then it’s easier to lose track of what’s going out of your bank account. By using cold hard cash you are putting yourself back in control and re-introducing the physical and emotional side of spending money. You’ll be surprised how hard it is to hand over cash when you count every penny!
5. Repair Your Ratings
Poor or out of date credit ratings will affect your attractiveness to any potential lender. It is vital that you regularly review your credit rating with credit reference agencies in order to benefit from the most competitive rates on the market.
Have you ever:
- Missed a payment to a mortgage, loan or credit card?
- Forgotten to cancel an old or out of date credit card?
- Had a relationship with someone who may have a bad credit rating?
- Used comparison websites without checking whether they will be searching your details with a credit reference agency?
- Forgotten to update the electoral register after a change in living circumstances?
All of these are a serious ‘no-no’ to potential lenders but most can be easily rectified with a few telephone calls or emails.
6. The Bigger Picture
Never forget that a monthly budget must also take into account items that happen annually such as Christmas, holidays, car tax and MOT. By adding up the cost of these items and then splitting it equally throughout the year will significantly reduce the impact (and stress) that a larger bill can cause. A small-ish saving of £50 per month equates to a whopping £600 per year; enough to cope with the stresses and strains of the average family Christmas. If that seems too much, have a look at your budget and try to work something into it for the bigger picture as even a little can make a big difference to how you feel and how you cope with a bigger bill when it arrives.
7. Address the balance
Think of your finances as a finely tuned set of scales that must stay at least equal at all times. If the weight is tipped in the favour of income over expenditure then use any excess to pay off debts or increase savings. All of these things will help you feel more in control and confident of your financial status.
If the balance falls the other way and you regularly find yourself overspending, it may be time to re-dress the balance and look for ways to increase your monthly income. Analyse your skills and use them to earn extra cash. Gardening, musical tuition, DIY, sewing and cake making are all skills that are in short supply and could provide the extra income you need.
8. Cut Food Bills Quickly And Easily
How many times in a month do you wonder what to cook for an evening meal? How many times do you then end up buying a takeaway or something quick and easy from a supermarket shelf?
With just a little planning you can reduce your average monthly food bills by a massive £240 per month, that’s £2880 per year! If you don’t like monthly, try weekly to start with – you’ll be surprised at how easy it is.
- Make a monthly menu – you don’t have to always stick to it rigidly but it will help you to make sure that when you shop monthly you have key ingredients in store.
- Make a monthly shopping list based on your meal planner
- Avoid supermarkets for all but the absolute essentials
- Use local markets or shops, they often offer better value and better products
- Make meals in batches and freeze them. Great meals that cost a fraction of a takeaway or supermarket packaged meal can be ready in minutes.
9. Take Back Control
It is so easy to give in to the sound of a screaming child or your best friend who asks, ‘Fancy a quick half after work?’ Despite all your good work to follow the ten golden rules to financial security, we’re not sure you are a Saint just yet!
You don’t always have to say ‘no’, but you do need to be able to.
10. Know When You Need Help And Get It
Only you can change the direction of your finances and put a halt to a spiralling debt problem.
There is help out there for those struggling to come to terms with a personal financial crisis but it can often be misleading or confusing. Debt advice agencies can often be a cover for more disingenuous organisations who simply want to make money from your misery. They charge you a fee for sorting out your debts and hide it in your monthly payment. If in doubt, don’t contact them.
For genuine help and advice contact:
CCCS Consumer Credit Counselling Service – 0800 138 1111
Citizens Advice Bureau – www.citizensadvice.org.uk
Debt Advice Foundation – 0800 043 40 50
National Debtline – 0808 808 4000