All about living expenses

Getting your head around the world of money can be tough. But, once you’ve got the fundamentals down, everything gets that bit easier.    

Last time we looked at giving you a better understanding of money coming in. This time, we’ll look at some of the most common outgoings, and where you might be able to make savings.  

Household bills  

Rent / mortgage – Unless you own your home outright, renting or paying a mortgage is pretty much always going to be your biggest expense. There’s not a huge amount you can do to get around this fact. But, if you’re looking for a new place, there are schemes and tactics that could help you find cheaper rent or make landing a mortgage more achievable. And if you’re ever concerned about your current housing costs, there are resources for renters and those with mortgages out there.  

Energy bills – There are lots of small steps you can take to keep costs down with your existing provider, such as turning your heating down a few notches. A smart meter is also a good way of keeping track of how much you are spending each day and will help you to work out ways to reduce usage.  If you don’t have a smart meter, you should submit regular meter readings to ensure you’re charged the right amount. You can also look at free switching services which will tell you if you could save money by moving to a new supplier. If you find a better option, they’ll normally help you make the transition, too.  

Broadband – Your monthly bill tends to be set, so there aren’t usually changes you can make to reduce your broadband bill each month. What you can do is use a free switching service to see if you could find a cheaper deal. Depending on how you switch, your current provider may even make a counteroffer at a better price to keep you with them. However, always check the deals of your current contract as there might be a charge for breaking early.  

Phone bill – When picking a phone contract, make sure you’re only paying for what you need. If you don’t use much data, there’s no point paying for an unlimited package. You should be able to track how much data you’ve used historically through your provider. Or, if you’ve reached the end of a contract, you could consider moving to a sim-only deal. This means you won’t get a flashy upgrade, but could end up saving you a fair chunk each month.  

Council tax – Unless you move, you can’t switch council tax provider. But there are some discounts – such as if you live alone – which you might qualify for. Find out more here. How much your council tax is will depend on a number of factors, including the value of your property, the area you live in and any deductions you qualify for. The value of the property determines which ‘band’ you fall into. A is the cheapest band, H the most expensive. You can check which council tax band your property falls into here. 

Water – As with council tax, you can’t switch water supplier in the same way you can energy. Monthly water bills can be fixed or based on usage. If yours is fixed and you feel you’re being charged for more than you use, you could ask to move to a water meter. This would mean you’d be charged based on how much water you actually use. Don’t forget, it could end up costing you more if you do this. Head here for more detail.   

Childcare - From nurseries to babysitters, childcare costs can stack up quickly to become one of your biggest monthly outgoings. But there are schemes out there that can help lighten the load. If you are entitled to Universal Credit, up to 85% of your childcare costs can be claimed back. And if that’s not an option for you, there are many other options including tax-free childcare, childcare vouchers,  child benefit and more. 

Dealing with debt 

Next, let’s look at debt. You may also have regular debt repayments. If that’s the case and they’re hoovering up more of your money than you’d like, here are some tactics that could help.  

Create a budget: Take a look at your monthly income vs your regular expenses. Are there any areas you could cut back on so you could pay more towards clearing your debt? Check out The Money Charity’s budgeting tool for help with budgeting. 

Consider consolidating: If you’ve got lots of debts in different places, you might be able to make your life simpler – and save money – by consolidating everything into one loan. The savings come as you might be able to get a lower interest rate on your consolidation loan. To be clear, you’re not taking out more debt by consolidating, just moving what you already have into a different place.  

Don’t take out more debt: This may seem obvious, but sometimes it can be tempting to borrow money to help pay off your debt. However, you should always focus on paying down existing debts rather than borrowing more. 

Automate your repayments: Most lenders will allow you to automate your repayments. This means you’ll keep chipping away at your debt without having to lift a finger. Not to mention you’ll avoid fees or penalties that can be applied for missing payments.  

Prioritising your debts: If you’re juggling multiple debts and are seriously struggling to keep up, as a last resort, you may need to consider prioritising certain repayments over others. For example, if falling behind on your mortgage could see you lose your house, this would be a debt to prioritise. You can find out more here. But before making any decisions on prioritisation, there are organisations who can provide debt advice free of charge. Here are some options:  

• StepChange 

• National Debtline 

• PayPlan  

• Citizens Advice  

 If you’re not sure if your debt has become a problem, these are some signs that you may want to seek advice.  

• You feel your debt is getting out of control  

• You’re avoiding reading your bills 

• You’re borrowing more to pay off existing debt  

• You’re borrowing money to pay for food or essentials 

• You’re borrowing shortly after being paid 

 Making credit work for you

Taking on debt is a big decision. Not keeping up with repayments can have a serious impact on your finances, so it’s never something you should rush into. Consider:  

• Do I have room in my budget to afford the repayments? When thinking about this, you should be leaving a bit of a buffer. Then, if any emergency costs pop up in a month, you can cover these, while keeping up with your repayments.  

• Am I borrowing money for something I need, or something I want? For example, if you need a car to get to work, using car finance could be a sensible option. If you’re looking to pay for a holiday, maybe it’s better to save up rather than taking on debt to pay for it.  

• Will I be paying off the debt for longer than I have the product? A car loan that means you own the vehicle at the end of the term, or can use it for the whole time you’re repaying, might make sense. Whereas paying off a big night out or concert tickets for many months after the event, perhaps isn’t the best use of credit. 

• How does taking on more debt make you feel? Some people don’t like to have any debts whereas others have a more relaxed approach. There’s no right answer but your debts should feel manageable and not a cause of constant stress and worry.

• Can I borrow from a lender who’ll tell me my interest rate before I apply? Some lenders allow you to check if you qualify to borrow money, and how much interest you’ll be charged, without affecting your credit score. This way you can get a true sense of how affordable the debt is before applying. 

• Do I know what the charges are if I end up not being able to pay? Different debt can come with different consequences if you don’t repay. Make sure you know what would happen in the worst case scenario of not being able to repay. 

• Do I have a steady, reliable income? If you’re between jobs, it may be best to avoid taking on debt which you’ll need to repay according to the lender’s schedule.  

Interested in finding out more? Sign up for one of The Money Charity's free and interactive virtual workshops by emailing fintechpledge@themoneycharity.org.uk for a deeper dive on managing your personal finance.