In July 2022, U.K. Food and energy prices rose (and continue to rise as I write this), causing inflation to skyrocket to a 40-year high of 10.1%, worsening the nation’s affordability crisis.
In 2021, wholesale gas and energy prices were already rising due to increased demand. Economies emerged from Covid-19 lockdowns and heightened regional supply rivalry.
The ripple effect intensified in the U.K., as average annual energy costs in the nation, constrained by a price cap, sharply increased. It is predicted to increase rapidly in the fourth quarter and surpass £4,266 ($5,170) in early 2023.
There is no doubt that people will be sinking into very bad credit, seeking loans from direct lenders in the U.K. While easy loans for bad credit might be made available, consumers will still be left in the dark as far as repayments are concerned.
Prime Minister Liz Truss announced a freeze on energy bills as soon as she assumed office.
Her announcement replaced Ofgem’s price cap, which they set to increase to £3,549 for the typical home on October 1st. But with her foresight, British households had to deal with £2,500 annually until 2024.
Yet, the average consumer is still grappling – even with the cap. They are in arrears and still have a lot to pay back to the government.
Hope is available in the form of time and saving methodologies. These can be adopted instantly and in the near future to set all energy and lifestyle records straight.
Read on to enlighten yourself about some of the unique ways in which you can save money and keep your Piggy Banks full.
Innovative ways to budget, save and borrow
It’s common to feel as though you’ve heard it all before when it comes to some of the time-tested financial advice. It discusses the significance of saving, creating a budget, and prudently borrowing.
Going back to the basics is helpful. The present cost of living issues puts many of us under unprecedented strain.
But the new age requires new ideas. It is simply because growing your finances without having to make concessions to your favourite activities can seem challenging.
Here are some suggestions for decreasing spending without feeling like losing out if you’re having trouble finding money to save.
Saving and budgeting
1. Find a responsible financial companion.
If we have someone (or something – like an app) beside us, staying motivated to complete tasks that we find unpleasant is simpler. It works since we don’t have to worry about disappointing them or breaking a promise.
Create a dedicated space even for more minor money matters, especially if you are already stressed.
You could organise something like a money management version of a reading group with a friend or set of friends.
Alternatively, use a website that connects you online with similarly motivated people to focus on getting things done without being distracted.
2. Take part in a savings challenge
Start your own triggers by accepting a savings challenge. These usually entail routinely setting aside tiny sums to desensitise oneself to it.
For instance, take the 1p challenge available on the MoneySavingExpert website. You begin with saving 1p on day one and then increasing the amount daily to £3.65 on day 365.
Another one is the 365-day challenge. It begins with weekly resets of £1 on Monday, £2 on Tuesday, £7 on Sunday, and so forth. In the end, the investments would total almost £1,500.
Monzo customers automate the savings process through an app, the IFTTT if they think the manual method is too tedious.
Estimates state that around 8,000 customers saved £17.7 million in 2021 (an average of £630 per client), and many of them used IFTTT to become debt free for the first time.
3. Checking on regular utility providers
You can review prices on comparison websites to determine whether you could pay less for home expenses like gas, electricity, or broadband.
Over a year, even a tiny amount saved each month can build up significantly. Try depositing the money you save each month in your savings account if you can switch to more affordable deals.
Once you find something conducive, you must set up a monthly standing instruction.
4. Internal Borrowing
Money circles or lending clubs have been around for a long time now. Since ancient times, friends and family have formed lending networks outside the banking system.
All of them have a similar structure. One organiser gathers a group, and each participant contributes a predetermined amount regularly, such as £100 per month.
After that, everyone alternates taking out the saved money. If ten people saved £100 per month for ten months, one person would have a lump sum of £1,000 each month.
It’s a strategy to make you save while helping the people you care about, even if you finish last.
Because the circles build on trust, anyone who stops contributing after receiving their compensation risks losing face. However, a lot of people discover that the element of commitment helps to solidify a regular saving practice.
For instance, Stepladder provides online versions of circles you can join with strangers from the community. It has safeguards in place in case of default, which is uncommon according to the business.
Stepladder, citing data from the National Bureau of Economic Research, asserts that group savers are 300% more likely to reach their goal than solo savers.
5. Ethical loans
Ethical loans are a well-talked-about mode of borrowing. But the scheme is, however, seldom practised. Being poor can be costly. People with fluctuating incomes (or those who are less well-off) always require credit for emergent expenses.
Nevertheless, most lenders see this as an opportunity to make more money. Consumer market credits face many issues due to this attitude.
But CDFIs or community development finance institutions are the best alternative to high-cost credit. These non-profit lenders are cheap, and consumers get to save millions each year.
Here’s a scenario: You get up one morning, it snowed all weekend, and you are on a low income. You only have money for that much, and children are still being home-schooled because you cannot afford to pay for a good education.
Suddenly, there’s no hot water. The boiler has malfunctioned. You are now nervous because you cannot pay for repair. It’s because you don’t have the extra stretch to pay and don’t have any savings.
You cannot even take a loan because you still haven’t repaid the previous company from where you borrowed.
Approach a CDFI, and they will assess your situation to let you know whether you have enough to make repayments at the end of the month.
They check benefit entitlements, rebates, and discounts and even help you save while getting your children some warm clothes for the winter.
CDFI’s interest rates are equivalent to APR 69% to 224% for a £500 loan for five months.
6. Look into tax perks and relief
There may be options for PAYE taxpayers to reduce their tax obligations. You might be eligible for tax assistance.
For instance, if you need to purchase a uniform for work. Sometimes, you may also be eligible to deduct your charitable contributions and maintenance payments.
Tax relief is a vast subject. Approach a professional to help you find some respite, as you may also be able to claim certain benefits from the government.
There’s more to savings than merely looking at supermarket buying and subscription cancellations. Finding new ways to ensure your bank account stays full and you don’t face a crunch even with rising energy or other utility bills is best.