Navigating the cost-of-living crisis with StepChange

When we launched our free cost-of-living forecast earlier this year, we quickly realised that some people using our service were already under significant economic strain. We had already created a knowledgebase of resources on our website for those who needed further support, and that included building a partnership with StepChange, the leading Debt Charity.

I have spent a lot of time on this blog writing about the macro-economic trends currently at play. But increasingly it’s the human challenges of this inflationary crisis that need attention. So today I wanted to highlight some of the practical support that is offered by StepChange. Much of the advice in this blog comes directly from them and I make no apology for repeating it verbatim – if it helps just one person get the right support or help, I’ll be happy.

About StepChange

StepChange helps people deal with their debts and provide expert advice to put together a realistic monthly budget. They’re flexible in how you contact them: you can get advice online or over the phone, and they'll recommend a practical debt solution, based on your situation, from the wide range of options they support.

Eligibility for benefits

One thing I was shocked to learn about was how many people in the UK miss out on benefits and tax credits to which they are entitled. Literally billions of pounds of support goes unclaimed, so it’s important to check you’re getting all the income you’re entitled to. Benefit payments are usually available if you're out of work, you've got children, you have a low income or you're ill or have a disability. You can check what you're entitled to by using this free benefits calculator provided by StepChange. It identifies any benefits you can claim, to help increase your income and improve your situation.  

If you’re earning money and on pay as you earn (PAYE – most people pay income tax in this way), make sure your tax code is correct to ensure you’re not making overpayments accidentally. For example, if you have one employer and earn under £100,000, then your tax code may be 1257L (with an S at the start if you live in Scotland and a C at the start if you live in Wales).

Your tax code might change for a few reasons:

• You start to get income from an additional job or a pension
• Your employer tells HMRC you’ve started or stopped getting benefits from your job
• You get taxable state benefits
• You claim Marriage Allowance
• You claim expenses that you get tax relief on

‍Making a budget 

This is the first step towards taking control of your finances and getting your situation back on track. Budgeting helps you to see where your money is going, so you’re covered for all the things you need to pay for. To put together a budget:

1. Work out your total income

Add together all the income you get each month. Make sure you include everything, whether it’s wages, benefits, or pensions. If some of your income is paid weekly or 4-weekly, you’ll need to turn these figures into ‘calendar monthly’ ones.

To do this you need to multiply the weekly figure by 52 and then divide this by 12. This will then give you a calendar monthly figure to include in your budget.

2. Make a list of everything you spend each month

Start with your most important bills, such as your mortgage, rent, council tax and utilities like gas, electricity, and water. These are classed as priorities, because they have the most severe consequences if your payment is late or if you miss a payment. 

Next, write down what you usually spend on living costs such as food, clothing, and toiletries. Shopping receipts can help you work out what you typically spend on these items each month.

You should include amounts for things you only pay for less regularly or once a year, such as Christmas, car repairs or a vet’s bills. To do this you need to divide the yearly cost by 12 to give you a monthly figure which you can include in your budget. You can then set this money aside until a bill is due.

3. Deduct the total amount you spend each month from your monthly income

If you’ve got any money left over after you’ve paid for everything you have a ‘budget surplus’. If you’re spending more money than you’ve got coming in you have a ‘budget deficit’.

Whether you’re worried about missing important payments or simply wanting a clearer picture of your finances, there are lots of benefits to making a budget. Creating one will help you find ways to save money, and you may also discover that you’re spending more than you thought on interest and charges for credit cards, overdrafts, or catalogue accounts. (You can also use apps like Nous, Snoop and Plum or sites like moneysavingexpert.com to make some of this easier).

If you’re struggling to make payments, you can often come to an agreement with creditors to make affordable payments based on your budget. You can share your budget with your creditors when asking them to agree to a temporary payment arrangement or a payment holiday.

Get free debt help from experts

You’re not alone if you’re worried about debt – millions of people are struggling with money worries. There is always a way to deal with it. 

When you access StepChange’s online debt advice tool or contact them for help, they’ll help you make a budget and understand your finances. At the end of your advice session, you'll get a copy of your monthly budget and personalised recommendations on how to deal with your debts. You can also benefit from support and understanding throughout your advice journey and beyond. 

Whether you choose to go through their online service or speak to an advisor on the phone (0800 138 1111), StepChange recommends you prepare for your debt advice session as best you can. It helps if you can gather details about:

• The money you have coming in, for example your wages, benefits, pension payments or tax credits
• Your regular living costs, such as your rent or mortgage, what you need to spend on food, travel and insurance, among other things
• How much money you owe and who you owe money to, including any interest, fees and charges

If you don’t have everything to hand, don’t worry. You can pause your session and come back to it later, or switch between online and telephone to suit your needs.

Start the conversation today

If your mood is regularly affected by financial stress, then it’s likely your close friends and family will sense that something’s wrong. You could be tempted to keep them at a distance, rather than tell them what you’re dealing with. However, supporting each other is much better than struggling on alone.

As the UK’s leading debt advice provider, StepChange helps hundreds of thousands of people every year to take back control of their finances. The charity has nearly 30 years’ experience providing free debt advice, with expert advisors offering practical help and debt solutions.

Are you interested in understanding your finances better? There’s no better time to start than right now. Take that first step and try their 60-second debt test today.