Following two years of Covid restrictions there was hope that 2022 would herald a brighter and more optimistic future. However, a combination of factors, including the cost-of-living crisis, geopolitical tensions, disruption by striking workers, energy price hikes and fears of a looming recession have led to a great deal of economic uncertainty which looks set to continue into 2023.

As we approach the end of the year, the rate of inflation in the UK has reached a record high, rising to 11.1% in November 2022 - well above the Bank of England’s (BoE) 2% target. The BoE do not forecast that the rate will start to come down again until the middle of 2023^[1].


Inflation is now one of the biggest challenges we face, as it erodes the buying power of our money. Put simply, an 11% inflation rate means that something that would have cost you £100 a year ago would cost you £111 today.

If you add taxation into the equation the impact is even greater and the continued freeze on personal tax allowances means that more people will find themselves paying higher amounts of tax as their earnings or pensions income increase.

This combination of factors is causing of a great deal of financial stress and worry for many.

Whilst there are certain factors that you have no control over, there are positive steps that you can take to improve your overall financial wellbeing.

Here we consider some simple measures that you can take to help you cope financially during these difficult times:

1. Save money on your energy bills

If you’re finding it hard to pay your energy bills, contact your provider. They should help you with ways to pay, and don’t be afraid to ask for help from a debt advice charity if you’re struggling.

Switching your energy supplier used to be a good way of saving money on your bills, but with energy prices soaring, you are probably better off staying on the standard tariff with your existing supplier once your fixed tariff ends.

Some suppliers aren’t taking on new customers, so you are protected by the energy price cap. The government-backed website – Simple Energy Advice – has tips on how to keep your energy bills down.

2. Save money on fuel

Try using a fuel price checker site to check that you’re always getting your fuel for the lowest price possible. Other ways to save include:

• Driving at a lower speed and avoiding accelerating and braking quickly if you can.
• Making sure your tyres are at the correct pressure.
• Removing anything heavy in the car that you don’t need to carry.

3. Food bills

Grocery bills can make up a significant proportion of your household spending, so it makes sense to look for savings. Plan your meals in advance and prepare a shopping list to avoid buying unnecessary items. Consider changing to an alternative supermarket or different brands if you can make cost savings.

4. Water bills

You can’t switch water suppliers, but there are steps you can take to keep your bills down. Check if you’d save money by switching to a water meter. You can use the Consumer Council for Water’s calculator to see if you would be better off with a meter.

If you’re on certain benefits and have a large family or someone with a particular medical condition you may qualify for the WaterSure scheme, which caps water bills. If you’re on a low income or receiving benefits, check what additional assistance your water company offers.

5. Council Tax

Depending on your circumstances and who is living with you, you may qualify for a Council Tax discount. For example, you can get a 25% discount if you’re the only adult living in the property. Find out what discounts are offered by your local council at GOV.UK.

If you’re on a low income or certain benefits, you may be able to get a Council Tax Reduction. Your bill could be reduced by up to 100%. There’s a different scheme in Northern Ireland.

6. Check if you’re entitled to State Benefits

Billions of pounds of State Benefits go unclaimed each year, and you could be missing out. The national charity Turn2us has a free and confidential benefits calculator on its website (https://benefits-calculator.turn2us.org.uk/), which can help you work out, which means-tested benefits you’re entitled to. It also has a grant search tool (https://grants-search.turn2us.org.uk/) for information on grants you may be able to apply for.

7. Find out where your money’s going

It sounds obvious, but many of us don’t realise exactly how much we’re spending each month, and what we’re spending our money on, until it’s laid out in front of us.

Review your last three bank statements and credit card bills (or check online) and spend some time going through them, highlighting any areas where you think you’re spending money unnecessarily. This could be on anything from a top of the range broadband package that you don’t need to a mobile phone contract where you’re paying for data you don’t use.

Every month money is wasted on unused subscriptions, with the most common being gym memberships. Even a magazine subscription costing a few pounds a month is money down the drain if you don’t have time to read the magazine. Take a few minutes to cancel any subscriptions that you don’t use to save yourself a bit of cash.

8. Draw up a budget

Drawing up a weekly or monthly budget will help you get your finances under control. It’s just a list of money you have coming in and what you spend, and it doesn’t have to take long to set up. There are plenty of templates online to get you started. Alternatively, budgeting apps can also be used to plan what you want to spend and keep track of it.

9. See if you can pay less interest

If you owe money on an expensive credit card, consider whether you can transfer the balance to a credit card charging 0% interest. Although these cards are interest free, you will typically be charged a balance transfer fee of between 1% and 3% of the amount you transfer. Because you won’t be charged interest on your balance, more of your money can go to repay what you owe.

These cards aren’t suitable for everyone, and you must make sure you can pay off your balance by the time the 0% interest deal runs out. It may also affect your credit score, especially if you do it multiple times.

10. Get help with unmanageable debts

If you are struggling to pay for the essentials, are using one credit card to pay off another, or your debts are causing you to worry, then contact a debt advice charity such as StepChange. They will be able to help you with your debts free of charge.

11. Build up an emergency fund

If you don’t already have one, start trying to build an emergency fund. Put the money that you save on your shopping or cancelled subscriptions, for example, to one side. As the fund builds it will give you peace of mind that you have a buffer should an emergency happen or an unusually large bill come in.

12. Make sure that any savings or investments that you have are working hard for you

Higher interest rates make borrowing more expensive. However, one positive outcome is that cash savings account interest rates are now at their highest level for more than a decade. At the time of writing instant access accounts were paying up to 2.85% per annum gross and fixed-rate bonds up to 4.36% for a one-year term^[2]. Review where your savings are held and move to better paying accounts if possible.

High inflation can have a particular impact on those pensioners who need to increase the withdrawals from their retirement fund to maintain their standard of living. A financial review can help to demonstrate the effect that larger withdrawals will have in the longer term and ensure that you are making them in the most efficient manner.

The recent Autumn Budget saw significant cuts to both the Dividend Allowance (which will go down to £1,000 in 2023-24, and then £500 in 2024-25) and the Capital Gains Tax (CGT) allowance (which will be reduced to £6,000 in 2023-24, and then £3,000 in 2024-25). These measures will have an impact on many moderate investors and those in share save schemes. Make full use of tax-efficient wrappers such as ISAs and pensions, as they can shield dividends or gains from tax. These allowances are lost if they are not used before the end of the tax year, so action before 5th April 2023 is essential.

Consider whether you could move a portion of your cash into investments with better potential for long-term growth. Historically, by far the most effective investments at beating inflation over the long term have been equities – but you do need to be comfortable that your investments will rise and fall in value.

Need help to make the most of your money?

Everyone’s circumstances are different and saving or earning more isn’t an option for everyone.

However, many people will be thinking about ways to save money and make their money work harder if possible.

Sources:

^[1] 03/11/2022 | When will inflation in the UK come down? | Bank of England
^[2] 21/11/22 | Best Savings Accounts | moneyfacts.co.uk

Please note: This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

The content was accurate at the time of writing. Whilst information is considered to be true and correct at the date of publication, changes in circumstances, regulation and legislation after the time of publication may impact on the accuracy of the article.

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