Cost of living crisis: How to manage debt and avoid spending more than you can afford

A poll by debt relief organization StepChange found that one in five people fear they will get into problem debt this year. We’ve created a guide to help you manage your debt and avoid spending more than you have

Woman looking at bills
According to a survey, one in five people fear that they will get into problem debt this year

As the Cost of Living Crisis starts to bite It turns out that three million people fear going into debt within six months.

Already before inflation According to anti-poverty group Jubilee Debt Campaign, those earning less than £21,000 a year spent at least 40% of their income on debt repayments.

And a poll by debt relief organization StepChange found that one in five people fear they will get into problem debt this year.

Phil Andrew, CEO of StepChange, says: “Without bold government action beyond the support offered in the Spring Statement, more and more people are planning to get into problem debt, eat up hard-earned savings or forego the basics, just to make ends meet.

“More targeted help with energy bills, greater forbearance and support for people struggling with energy debt and arrears, and raising benefit levels to keep up with inflation are key to alleviating the impossible financial burden facing many people are facing now.”

Here’s our guide to help you manage your debt and avoid spending more than you have…

Phil Andrew is the Managing Director of the StepChange Debt Charity

Write down all your debts

Figuring out how much you owe may be scary, but by making a list of your debt and the interest you pay on it, you can decide which is the most important or costly form of debt and take steps to reduce it to sort out.

Prioritize your debt and bills

Your most important debts may not be the largest. Some bills, like council tax, rent, or mortgage and utility bills, need to be prioritized so you can proceed with essential services and have a roof over your head.

Child support, council tax or payments on a secured loan should also be prioritized as the consequences of not paying can be severe.

You should prioritize your bills


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Transfer your overdraft to a credit card with 0% remittance

If you find you can’t get back in the black but are being charged for using your overdraft, one option is to use a special money transfer credit card, which allows you to use the card to deposit cash into your bank account .

The cash makes up for your overdraft so you owe the card instead, but at 0%. You then make monthly repayments on the credit card during the interest-free period, meaning every penny you pay back goes towards paying down the debt. Some cards charge an initial handling fee for borrowed money, so look for cards that don’t have a fee.

Transfer your credit cards to 0%

If you can’t pay off your credit card debt, you can switch to a prepaid transfer card, which is interest-free for a set period of time.

Some cards offer up to 36 months interest free. Some cards charge a fee for switching, so try to find one that doesn’t.

Some credit cards are free of charge


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Negotiate your debt

Creditors will often agree to lower your monthly payments if they can see you’re paying as much as you can afford. This can take the form of a payment holiday, which gives you breathing space to get your finances in order and where interest and fees can be frozen for a short time.

You can also arrange a debt management plan where you pay a much lower amount per month, while also being able to negotiate settlements with your creditors, who may agree to accept a percentage of the amount owed. Debt organizations like StepChange can help you make such arrangements.

StepChange’s Phil Andrew says: “It’s really important to speak to any creditors you have arrears with – banks are required by law to offer forbearance, utilities can offer write-offs for people in exceptional circumstances and many people are entitled to council tax reductions.

“If your creditors don’t know you’re struggling, they can’t help you, so reach out to them and let them know.”

Contact your suppliers

You may be paying more than you need to on your bills and subscriptions. Spend a day sifting through your bills and calling each provider to see if you qualify for better deals or discounts, from your cellphone and broadband to streaming services.

Use money apps

There are a number of useful apps to help you manage your money, keep track of your spending, and reduce impulse buying.

Moneyhub lets you see all your accounts in one place, while Money Dashboard is an online personal finance management tool that you can use on your phone.

Our cost of living Team of experts is here to help YOU through a very difficult year.

They bring you the latest money news and also offer expert advice.

Whether it’s skyrocketing utility bills, the cost of weekly groceries, or increased taxes, our team is always by your side.

Every Thursday at 13:00 they participate in a Facebook Live event to answer your questions and offer their advice. visit watch. You can read more about ours team of experts here.

If you have a question or would like to share your story, please contact us via email

Eliminate duplicate payments

Go through your bank statements with a fine-toothed comb to look for unnecessary or duplicate payments that you may have forgotten to cancel.

For example, people often sign up for antivirus software when they buy a new computer without canceling the old one. Or you pay for a subscription that you no longer use.

Check out ways to earn extra money

There are many ways to gain a few extra pounds such as B. using cashback websites or selling unwanted goods on the internet. If you’re receiving benefits, remember that any additional income can affect the amount you’re entitled to.

Depending on your situation, you may also be able to apply for government assistance. StepChange’s benefit calculator can help you ensure you’re getting the help you’re entitled to.

Get the whole family involved

It is common for a family member to be responsible for household finances, which means no one else in the household knows what is really going on.

It’s important to come to terms with your partner and family members so everyone in the house can get involved and help cut costs. This can mean some tough conversations, but getting your kids involved in the budgeting and saving process will also help them develop personal finance skills that could help them later in life.

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Get professional debt help

Don’t be afraid to ask for help. Organizations like StepChange and National Debtline can help you find solutions to your debt problems and put your finances and life back on track.

“Our number one piece of advice is don’t make the mistake of going it alone,” says Phil Andrew of StepChange. “If the last two years have shown us anything, it is that we are all at risk of circumstances beyond our control – which is the main reason people get into debt. It can happen to anyone, and advice is for everyone.”

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