Taking Control Of Your Finances In The Cost of Living Crisis

The cost of living crisis has had a significant impact on people all over the UK, with many people struggling to adjust to the new way of life where everything is more expensive. So, we’re here to introduce a few different ways to help you navigate the cost of living crisis, whether you are wanting to be cautious for the future or you are already in a difficult financial position and want to make some positive changes to make some healthy financial decisions!

A cost of living crisis can be extremely difficult, but the best thing we can say is to be honest with yourself about where your finances are, so you know exactly what you’re working with and from here, you can take control. We know this is easier said than done, but we hope our article breaks this down to make things slightly easier to process. So, let’s get into it and look at how you can adjust to this new way of life in the cost of living crisis.

Establish Your Current Financial Situation

The first thing you need to do to make sure you can navigate the cost of living crisis well is to figure out exactly what your current financial situation is like. So, sit down, make a note of what you have in every bank account, then also look at everything else such as credit cards, loan repayments and all of that type of thing. This will help you to know exactly where you are starting from, as the worst thing you can do is to ignore different debts that you are in and they will only get worse. So, once you know exactly where you are starting, you can make a more accurate budget, which is the next step.

Create A Strict Budget

Now that you know where you are with your finances, you need to create a strict budget. Firstly, write down all of your absolutely essential outgoings that you have no control over. These are usually rent/mortgage, council tax, water, electric and gas, debt repayments, insurance and phone contracts. With things like insurance and phone contracts, they may be fixed for now, but when renewal comes up make sure that you’re proactive and make reductions where you can.

Then, list the rest of your essentials that you must get, but you have control over the cost of. These include food, medicines, cleaning supplies, essential clothes and public transport.

Lastly, list all of the things that you ideally want to spend but may not be a priority, such as house savings, holiday savings, birthday/Christmas presents and going out with friends.

Once you’ve listed everything, start by writing down how much you need to spend on your essential outgoings. Then, go through your essentials that you have more control over and see where you could cut down slightly, for example switching to a cheaper supermarket or changing your cleaning products for a cheaper brand. Once you have filled all of this out, you will see what you have left for the extras, where you can decide what is a priority for you in terms of spending.

Then, most importantly, add up all of your outgoings and make sure that they’re less than your income! Having all of your spending in one place helps you to take control and be accountable for what you’re spending.

In terms of keeping track throughout the month, put all of your target spends on a spreadsheet, then also have a “Spent” column and “Remaining” column. Say you have £200 to spend on your food shopping and you spend £55 in the first week of the month, you would add £55 to your spent column and then £145 in your remaining column. This helps you keep up with how much you’re spending, so you know where you might need to cut back throughout the month too.

Having a thorough budget is so important when it comes to taking control of your finances.

Take Control of Your Debt

Another vital thing you need to do to take control of your finances in the cost of living crisis is to take control of any debt. If you are in debt and are struggling to make all of the repayments, rather than ignoring it and letting the situation escalate, it’s time to take control and take action too. Getting out of debt and moving towards financial freedom can be really overwhelming, as there are many different routes to take.

Once you’ve followed our first tip and you know exactly how much debt you’re in, do a bit of research to find a realistic route to help you get out of your debt. This could be adding really strict repayments into your budget to make sure that you are clearing your debt or it could be focusing on paying off a chunk of your credit card and then reducing the spending threshold to help you take control.

If you are completely out of control with your debt and you have multiple creditors, then you may need to apply for an IVA, which helps you to write off a chunk of the debts that you owe with the help of your IVA advisor, usually a solicitor. This can be life changing for people in a significant amount of debt, and simply having a chat with someone to see if it could be right for you will not do any harm.

No matter how much debt you are in, ignoring it and hoping things will work themselves out is the worst thing you can possibly do. So, use this as your sign to be honest with yourself about your debt and take action.

Reduce Costs Where You Can

There are some components in life where you have very little control over what you spend, but in others, you have much more control. So, on your budget, identify areas where you can save money. Usually this is in areas like transport, food shopping, toiletries and so on. When it comes to food shopping, create a weekly meal plan to make sure that you are reducing food waste as much as possible. Then, create a strict list to go to the supermarket with and choose your own brands rather than branded items. Stick to your list to make sure you don’t overspend and choose frozen fruit and veg where you can to again reduce food waste and save some money. Do the same with your cleaning products and toiletries, cutting back wherever you can.