The 25-minute money hacks that will stop your finances seeming scary

Our finances can often cause us stress and never more so when fears about inflation and the rising cost of living are everywhere you turn. It’s tempting not to look too closely at your bank balance, credit card statement, or increasingly our Buy Now, Pay Later (BNPL) apps, simply hoping that everything will be okay and ignoring any potential problems.

But whatever your financial situation, there are some simple, straightforward steps that you can take to regain some control and curtail the worry. Whether it’s tips about reducing costs, strategies for spending smarter, ideas for earning extra cash, or simply ways of thinking about your money differently, there are plenty of easy ways to rejuvinate your relationship with your finances.

The stresses and strains on household finances are undoubtedly becoming heightened, but this doesn’t mean that you can’t take proactive steps to put yourself in a better position.

Mind over matter

Concerns about money can lead to action paralysis whereby people simply worry about their financial health but fail to take steps to address the issue. Elizabeth Buko, a financial coach and the founder of Wealth From Little, believes that people need to step away from the things that amplify their fears about money, and begin to look at their own financial circumstances.

“I think people hear the news about prices rising in the shops and energy bills going up and this makes them more scared,” she said.

“It can be sensible to reduce your exposure to media content [that heightens these fears] to avoid being in an environment that feeds your fears.”

Ms Buko adds that budgeting apps, such as Emma, are excellent ways for people to become more familiar with their finances, enabling them to track income and expenditure, create budgets, and also oversee investments.

“Being afraid of looking at the numbers of your bank balance doesn’t change what the numbers say,” she said.

“I used to be scared of looking at the numbers, because if you’re not looking at them, they’re not real and you can keep on spending. But when you get daily notifications about money coming in and going out, it’s a really helpful way to become more familiar with your finances.”

Some money issues are exacerbated by mental health issues or other difficult home or family circumstances. Again, rather than trying to ignore these, it’s far better to be open about them with companies you might owe money to. The Vulnerability Registration Service is a central, independent register of vulnerable people, which helps companies identify who is vulnerable and therefore enable them to assist those individuals.

Its chief executive Helen Lord said by giving vulnerable consumers a single place to register their status, the VRS helps them avoid having to repeat the same difficult conversations every time they engage with organisations like lenders and creditors.

“People can register with us directly and we are seeing an increasing number of people coming directly to us,” she said.

“Equally, we work with organisations including councils, solicitors and estate management companies, who can use the data and register customers on their behalf. Our service is a flag for the organisation that an individual is in a vulnerable situation, therefore helping that business to meet their obligations – both regulatory and ethical.”

Try the tried and tested

Consolidating debt or switching to lower interest rate products isn’t new advice, but it’s still something that more people could take advantage of. It’s especially pertinent at present, with spending on credit cards rising rapidly in the UK; recent Bank of England data showed this type of borrowing rose at its fastest annual pace in 17 years.

Add to this the fresh numbers from the Office for National Statistics (ONS) showing that the biggest contributor to rising credit and debit card spending was ‘staples’ in the week to June 1, and it suggests a rising number of households are feeling the pinch. Research by Freedom Finance shows that average overdraft rates exceeded 34 per cent for the first time in April 2022, and rose further last month.

The firm recommends carrying out an audit of your existing debt to see what rates you are currently paying and whether cheaper deals are available. While 0 per cent balance transfers can be attractive, Freedom Finance urges consumers to “check that you aren’t being stung by any hidden fees or charges” if you are considering moving your debt.

Furthermore, consolidating debt with fewer providers – ideally one – is advisable, or prioritising paying off the most expensive debt first. The VRS’s Ms Lord added that with several pay day lenders recently going out of business, she was seeing more vulnerable people turning to high-cost, short-term credit – something that can quickly exacerbate issues.

“There’s definitely a correlation between the people registering with us and those applying for high-cost credit,” she said. “The danger of people moving towards unregulated lending is a real one.”

Credit where it’s due

With around £15billion of government benefits and credits going unclaimed last year, according to analysis by Entitledto.co.uk, millions of households could improve their financial situation simply by confirming whether they are receiving all that they are owed. A whopping 850,000 UK pensioners are thought to be missing out on pension credit, which could pay up to £3,300 a year for those aged 66 and over with a weekly income of under £200.

Not only that, but those eligible for pension credit are usually able to receive other benefits that are regularly under claimed, such as help with the cost of a TV licence, and reductions in council tax. The latter is calculated on the assumption that two people live in a household, but single-occupancy households receive a 25 per cent discount, a potential saving of £474.50 on the average annual bill of £1,898 for a Band D property.

For those concerned about how to find out whether they are eligible or not for these and other benefits – such as child tax credit and working tax credit – various free benefit calculators are available online, including Entitledto, which is referenced by Which?. For those who are employed and pay into a company pension scheme, there’s a different type of benefit that could be claimed to reduce your tax burden.

Workplace pension and savings provider Cushon has found that UK workers are losing roughly £1.9billion by not opting to use salary sacrifice. Salary sacrifice involves an employee agreeing to reduce their salary by an amount equal to their pension contributions. The employer then pays the total pension contribution, a move which reduces the amount of national insurance paid by both worker and employer.

Although the threshold at which national insurance is paid will be raised in July to £12,570 (in line with the point at which income tax begins to be levied), gaining further reductions can only be a positive thing. Ben Pollard, chief executive of Cushon, said: “Salary sacrifice is a simple way for people paying into workplace pension schemes to save hundreds of pounds each year just by changing the way their contributions are made.

“If their employer uses salary sacrifice for their pension contributions, people pay less national insurance on their overall salary, while their take-home pay is actually higher and their pension contributions are unaffected.”

A side-hustle without the hassle

With the boom in ecommerce and the digital economy, many commentators often recommend people start a so-called side-hustle alongside their main job to increase their income. The problem with a side-hustle is that it often demands either time, skills or resources – or all three – that people can’t dedicate to it.

But this doesn’t mean you can’t make money or embrace thrift on the side. Besides exploring social media sites, such as Gumtree, or groups on Facebook, for free items, you can also earn from what you own.

By Rotation offers users the chance to lend items from their wardrobe to other users, earning money in the process, and the company says its most high-profile users include Stacey Dooley MBE and TV star Aisling Bea, while The Seam offers on-demand specialist clothing repairs and alterations in-person or via post, helping you to save money by extending the life of your clothes.

Jasmine Birtles is the chief executive of MoneyMagpie, which offers advice and insight into various ways to make, save and invest money. While her main piece of advice was for people not to panic and to prioritise making a budget, her site aims to help people make some extra money and spend more wisely.

“Get as much for free as you can,” she said, something that is easier now with various social media platforms and online groups.

“Many people can’t manage on their own, and it will get harder so why not get together with friends and family to reduce certain costs; for instance, I hire my neighbour’s car from her when I need it having sold mine, and I offer to do babysitting for a neighbour in return for them doing some cleaning for me.”

Ms Birtles also highlights on her site various ways to make money, including transcribing work, selling old phones and tablets you no longer use, and even being a film extra. While the amounts that people can earn doing these types of things will inevitably vary, and may not move the proverbial dial by a significant amount, it does prove that earning a little extra money doesn’t have to be as challenging as starting your own business alongside your existing job and family commitments.

Wealth From Little’s Ms Buko added that she registers with focus groups to earn money for filling in surveys or helping with market research, often remotely from the comfort of her own home. Elsewhere, sites like Gener8 help people earn money from their data, apps like Olio help connect neighbours with each other and local businesses so that surplus food can be shared for free rather than wasted, while firms such as By Miles target low-mileage drivers with by-the-mile policies that can be cheaper than conventional ones.

Watch the pennies…

…And the pounds will look after themselves, so the saying goes. Making small adjustments to how we live could have a helpful cumulative effect over a year. Using an appliance a little less or driving more slowly might not seem like it’s helping the bank balance, but various small changes, collectively, could reduce your outgoings over time.

Energy firm British Gas espouses setting the flow rate on gas boilers to between 50 degrees Celsius and 60 degrees Celsius for water, and also for heating in the warmer months. Furthermore, avoiding using a tumble dryer during summer could save a household £60 a year, and washing on a cooler 30 degrees Celsius cycle could save £28 a year.

Unplugging devices (a saving of £60 a year), switching off lights (£20 a year saving) and using an eco-showerhead (£19 off your gas bill and £30 off your water bill a year) also help. Beyond this, some energy providers charge less for using electricity at certain times, usually overnight and into the early morning. Using ‘delay start’ settings on appliances can help you use them when electricity is cheaper, if this is available on your tariff.

Combining all these could reduce bills over the course of a year, providing important savings given the rising cost of energy.

Your action plan

If there’s one overarching piece of advice from almost any commentator, it’s for people not to ignore their situation, and not to let their panic cause inaction. For those already in financial difficulty, or for those who believe it is imminent, it’s imperative that this is discussed with all the companies or organisations you owe money to. It’s easier to get help the earlier any issues are raised.

Debt advice charities such as Citizens Advice and Turn2us are also extremely useful sources of information and support. Making a budget is also highly recommended as it helps you understand what your outgoings are – and crucially if any can be reduced – as well as what your income is.

On the point of income, anyone who believes they could be entitled to more of a benefit they already receive and/or should get one that they currently don’t, check right away. With billions in unclaimed benefits each year, there’s a chance you could be owed more.

The government is making moves to assist with the cost of living crisis, with Universal Credit claimants set to receive £650 (split into two payments), while there will also be a £400 energy discount for all households, a £300 one-off payment to low-income pensioners and a £150 extra one-off disability payment. Many households will be facing difficult times in the coming months, but taking proactive steps now could help mitigate the impact.