How to stay on top of the financial precipice

If youíve suddenly gone from being fairly laid back about money to struggling to make ends meet, youíre not alone. Legal & Generalís latest MoneyMood survey shows that 12 million households now spend all their money on bills and debt repayments ñ thatís 1.3 million more than nine months ago[1].

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And if youíve got children, the chances are youíre feeling the pinch even more. According to the Joseph Rowntree Foundation, frozen child benefit payments and cuts in tax credits have helped to raise the cost of living for families by up to 20 per cent in the past year, with a working couple needing to earn £18,400 apiece to maintain an acceptable standard of living for themselves and two children[2].

The same study shows that singletons and pensioners are faring only slightly better, with a lone person requiring £15,000 a year to meet the minimum living standard and a retired couple needing £233 a week ñ or £12,116 a year ñ just to cover essentials, without rent or mortgage payments.

People who live in the countryside have yet more problems. The Commission for Rural Communities says that you need to earn up to 20 per cent more than your urban counterparts, thanks largely to the cost of fuel and transport[3].

Worryingly, the recent hike in the cost of living has left more families than ever on a financial precipice, with 57 per cent of households now teetering on the line between managing to pay bills and plunging into debt[4].

But the good news is that there is plenty you can do to get on top of the rising cost of living.

Experian has put together these tips that may help:

Audit your household

Try to go through your income and outgoings, looking for ways to cut back. A few suggestions – cancel old direct debits and subscriptions; cycle or walk to work; take packed lunches; and swap clothes, CDs and DVDs with friends instead of buying new ones.

Saving begins at home

With utility bills getting increasingly expensive, it may pay to use price comparison sites to check if you can get better deals. Many companies offer discounts if you pay by direct debit and opt for paperless billing, so check out whatís on offer.

Be a bargain-hunter

Join loyalty schemes, check for online discount codes and scour newspaper and magazine websites for special offers and give-aways. Youíll be able to save on everything from outings with the kids to clothes and meals out. You could even try grouping together with friends to buy necessities ñ from nappies and washing powder to pasta and tinned food ñ in bulk, to save more.

Tackle your debtsÖ

You may be able to lower your outgoings by taking advantage of an interest free credit card deal or rolling your debts into a lower-interest loan ñ but youíll probably only qualify if your credit report is in good shape. Registering to vote could boost your credit rating, as lenders use the electoral roll to verify your address. With base interest rates continuing to stay historically low, it may also make sense to pay off what you owe rather than putting money into savings.

Öand try not to add to them

Skipping a repayment could mean you face penalty charges, fees and a hike in your interest rate.  Plus a missed or late repayment stays on your credit report for at least three years, making it harder for you to borrow. If youíre having problems, talk to your lenders straight away ñ they may be able to help by rescheduling what you owe to make repayments more affordable.

Try a cheaper brand

There are savings to be made by substituting expensive branded items for cheaper equivalents, from toiletries to your favourite breakfast cereal.

Face up to your finances 

The best way to do this is by checking your credit report. This lists your credit accounts, such as cards, loans and your mortgage, along with your repayment history. Lenders use it to help them decide whether you qualify for the best deals and, in some cases, what interest to charge. If it isnít accurate and up to date, you could pay over the odds, so look for errors and inconsistencies and take them up with the relevant lender. Itís free to see your Experian credit report with a 30-day trial of CreditExpert[5] ñ and you can order your Experian credit score at the same time.

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