In this article
TotallyMoney is here to help you as the cost of living continues to rise. We’ve broken down the facts and options for you, so you can continue to move toward your financial goals
Why is the cost of living getting more expensive?
What costs are going up?
Tips on how you can save money right now
What you can do to stay on top of your finances
What is the cost of living crisis?
The current crisis is driven by a high inflation rate, which reached a 40-year high in late 2022.
However, currently experts do not think inflation will rise significantly in the first half of 2023, although it will remain at the high level it’s currently at. The Bank of England’s inflation rate aim is 2%, so five times that amount is clearly much higher than it should be.
The economy is expected to be in recession until at least the summer of 2023, and more likely until the end of the year, according to the government’s Office of Budget Responsibility.
So, as a result, key household costs, like food, petrol, and energy bills, have risen significantly since 2021.
The inflation rate shows how prices are increasing over time, and it impacts a majority of goods, services and financial products. It’s compared to how expensive things were one year ago. So, if there’s an inflation rate of 2%, you’ll pay 2% more for it this year than you did last year.
What does the cost of living crisis mean for you and your money?
It’s already having an effect, with 43%* having had to adjust their budget as a result. It’s likely that your energy bill increased in April 2022, and you’ve probably seen your food shop go up as well.
The rising prices could mean that the average UK household would have to pay an extra £2,500 in 2022/23 to buy the same goods and services that it bought in 2021/22.
If you need help right now because of rising costs, talk to one of these charities.
The best ways to combat the cost of living crisis
Although what’s happening is mostly out of your control, you do have options. Here are some things you can do to help your finances if you’re struggling at the moment.
💡 Helpful tip
If you’re struggling to keep up with your payments, or are facing general financial difficulty, you could also talk directly with your lender. They may be able to offer you a payment holiday or another way to help make things more manageable for you.
Make a budget
Take a look at your monthly income and outgoings. Try to cut any unnecessary subscriptions or look for areas you might be able to save money. Where possible, try to stick to a monthly budget so you’re covered for the whole month, and not waiting until payday to buy something essential.
Use a regulated lender
If you do need to borrow right now, make sure you borrow from a lender who is regulated by the FCA (Financial Conduct Authority). That way, they can be held to account if something goes wrong, and you can complain to the Financial Ombudsman Service.
Keep an eye out for ‘loan sharks’, who are more prominent in times of financial struggle and are not regulated by the FCA. That means you won’t be protected if something goes wrong.
There’s also been a rise in popularity of Buy Now Pay Later (BNPL) services. Not all parts of BNPL services are regulated, however, they soon will be by the FCA. As such, using them could affect your eligibility for credit.
These payment methods will be added to credit reports this year, and lenders will be able to see how frequently you use these services, and if you’ve ever missed a payment.
With any credit you use, only borrow what you can afford to repay, and always make at least your minimum monthly repayments.
Reduce your interest payments
If you’re paying interest on a current credit card balance, you should consider a credit card with a balance transfer offer.
A balance transfer offer lets you move a balance from one credit card to another, and gives you a set period to pay off your balance interest-free. So, you can pay off the same amount for less.
This could help you reduce your outgoings every month if you’re struggling right now, or help you pay off your debts sooner if you’re worried things could get worse down the line.
One thing to look out for is a balance transfer fee. It’s a small charge, calculated as a percentage of the amount you transfer, but it usually works out as less than what you’d pay in interest if you didn’t transfer.
Try to clear the balance before the offer ends, otherwise you’ll pay interest on whatever remains. Plus, always make sure the deal is right for you before applying.
Move your debt to one personal loan
If you have multiple credit with different lenders and different interest rates, it could be easier to use a loan to clear the debts.
This is called a debt consolidation loan. You’ll get a lump sum which allows you to pay off any existing debts at once, but make sure it’s at a lower interest rate. Then, you can make just one payment each month. You’ll know exactly how much those monthly repayments will cost you upfront, as well as the entire cost of your loan.
Choose credit offers carefully
If you need to borrow, here are some things you can do to make sure you get the right offer for you.
Where you can, avoid using Payday Loans, as these often come with very high-interest rates.
Plus, we’ll find your Best Match, which we think is the best option for you, based on what you’ve told us. All the offers you see are shown on what’s best for you, not based on the commission we get from the lender.
To give you some peace of mind, and to take any guesswork out of your credit applications, look out for these three guarantees:
If you’re pre-approved for an offer on TotallyMoney, you’re guaranteed to be accepted! That means you can apply with confidence and without the worry of rejection, at a time when you need greater certainty.
Just make sure all your information is accurate and up-to-date. And, you need to pass some final checks with the lender directly.
If you’re accepted for a credit card with a guaranteed limit, you’re sure to get the credit limit advertised.
This is great, as you’ll know if you’ll be able to borrow the amount you need.
A product with a guaranteed rate will give you the advertised interest rate. So, you’ll know how your borrowing will cost you, helping you to better plan your monthly finances.
Stay put with your energy supplier
The energy price cap — the maximum amount you can be charged for energy, has gone up — and is likely to keep going up. Find out more.
As a result, energy companies aren’t offering many new tariffs, and the ones on offer aren’t going to be better value for money. This means the best thing you can do right now is to stick with your current energy plan.
The government is offering help with energy bills. From October 2022, every household will receive a £400 reduction in energy bills over six months.
Additionally, energy bills will be reduced to around £2,500 a year, according to the government, until April, under a scheme known as the energy price guarantee.
It’s important to note this isn’t the maximum you’ll pay — the £2,500 figure is based on the amount of energy (gas and electricity) a typical household consumes. You could still pay more, or less, than that figure.
If you want the details, the price of electricity has been frozen at 34p/kWh, until April, and the price of gas at 10.3p/kWh. If you know how many kilowatt hours you consume of each, you could work out what you’ll pay.
After April, the support will decline, increasing the amount the typical household will pay from £2,500, to an expected £3,000-£3,100.
How best to buy a car in the crisis
A car may be an absolute necessity for you, but it can be expensive to buy. And at the moment, manufacturing costs are causing a lack of choice, and making both new and used cars more expensive.
There are several options to help finance your car if you can’t afford to pay upfront. For more information on the options available to you, check out this guide.
Managing your rent or mortgage
With the Bank of England increasing interest rates in an attempt to combat inflation, it’s possible your rent or mortgage costs will increase too.
For homeowners with a mortgage
If you’re a homeowner with a mortgage, your lender may be increasing their variable rate mortgages to account for the base interest rate, set by the Bank of England, rising.
If you’re on a fixed rate deal, where you agreed an interest rate at the beginning of the term, you won’t see a price increase until the deal finishes. Generally these deals are for two, three, or five years.
Make sure you know when your deal ends. If it ends in 2023, set yourself a calendar reminder or make sure you know the month it expires. Six months or so before, start talking to mortgage brokers or lenders about a new fixed deal.
If you signed up before the cost of living crisis and interest rate rises, it’s likely the new interest rate, and therefore monthly cost of the mortgage, will be higher, so make sure you can pay it every month before committing.
If you’re on a variable rate or tracker mortgage, your monthly mortgage payment will increase as your lender increases their interest rates, in line with the Bank of England.
Keep an eye on any price increase emails or letters sent to you, and always make sure you can pay the new amount every month. If you can’t, get in touch with your lender as soon as you can — they are duty bound to help you manage the cost.
When renting, you are paying someone else’s (the landlord’s) mortgage, plus any service charges, ground rent, property management fees, or included bills. These may go up as the cost of living rises, which means the landlord may increase your monthly rent.
If this happens, there are various ways to get support — or fight it if you think the increased cost is too much.
Housing payment and other benefits
You can apply for housing payment, which is part of the universal credit system, if you’re struggling to pay your rent.
There are a few requirements to qualify for housing payment: you must live in the UK; be over 18 years of age and under the state pension age (as of December 2022, this is 65, although it may change in the future); and have £16,000 or less in money, savings, and investments.
You can apply for housing payment on the government website. You may need to have an interview at a JobCentre Plus, to discuss your claim.
If that’s the case, you’ll need to take a few documents with you: a signed tenancy agreement, a signed letter from your landlord confirming you live there, and details of any service charges you’re responsible for.
Make sure your landlord will accept you using housing payment to pay your rent, before you apply. Some landlords will not accept tenants on benefits.
There are other benefits that can be used if you’re struggling to pay your rent. You could still apply for housing benefit if your rent goes through your local council, or as part of your pension claim, if you fulfil certain criteria. That includes if you’re a pensioner or live in sheltered housing. You could also get help paying your tenancy deposit, or discretionary housing payment for covering costs such as rent shortfall.
Fighting a rent increase
If you think your landlord has increased your rent by too large an amount, first try and negotiate with them. You could explain you’ll struggle to pay the new amount, and/or offer a lower increase which you can afford, or show evidence that the rent increase is above the market rate for your area.
But, the landlord is under no obligation whatsoever to listen to you.
If you feel the rent increase is too large, or that according to your tenancy agreement, you believe the landlord can’t increase the rent, you could go to an independent tribunal. This will determine the rent amount which is payable, and consider arguments from both you and your landlord.
If you want to go to tribunal, Shelter has an excellent guide about the specifics.
How to stay on top of your finances amid the crisis
It’s more important than before to keep on top of your finances, so you know how your decisions are impacting your financial situation now and in the future. Here’s how TotallyMoney can help.
Get your credit report
Check your free credit report and live credit score with TotallyMoney. Your credit score is updated every day you log in. Plus, we break down the major factors impacting your credit score.
TotallyMoney uses credit report data from TransUnion, so we recommend that you access free credit report services which use credit report data from Experian and Equifax (the other two credit reference agencies). That way, you’ll get a fuller picture of your credit rating.
And, we’ll keep you updated about changes that could impact your credit score by email and push notification.
Check your Credit Assistant
Download the TotallyMoney mobile app and you’ll get access to Credit Assistant, giving you a picture of how you use credit over time. It’ll tell you if you’re using expensive types of borrowing, highlight key trends and behaviours, and help you keep tabs on credit accounts.
See what’s impacting your eligibility
On the TotallyMoney app, you can now see exactly what’s holding back your eligibility for credit. We’ll also tell you what you could do to improve your eligibility, so you could start to see better offers.
Where else can you find help?
We may not have all the information you need, and we can’t provide direct advice about your financial situation. Here are three organisations which may be better suited to help:
*Based on research by TotallyMoney and PwC on the Overlooked and financially underserved