How to cut the cost of living

Rising energy prices, inflation and the National Insurance hike will put many household budgets under strain from April. Ruth Jackson has some ideas on how you can cut your cost of living.

The spike in oil and gas prices will see the average household energy bill rise by £700 this year. Fuel costs have also risen. Inflation is expected to top 7% by the spring as supply-chain problems and staff shortages push up the cost of many everyday items. National Insurance contributions are rising in April with employees, employers and the self-employed all paying 1.25p more per pound. Anybody living on dividends will also see a commensurate 1.25 percentage point increase in the tax rates they pay. 

All these factors have contributed to a cost of living crisis that is leaving many household budgets under strain. If you are in this position, there are frankly no easy answers, but it’s important to look at anything you can do to offset rising bills. 

Check your energy deals

The usual advice is to start by checking whether you are paying too much for your electricity and gas. However, with wholesale energy prices so high, it may not be possible to get a better deal by switching now. Still, it’s worth checking in case you are on an exceptionally poor tariff. A recent bill will show you what you are paying and how much energy you use. Put this information into a comparison website to see if you could pay less elsewhere.

If you are on a provider’s standard variable tariff, be prepared for your bill to increase substantially when the energy price cap rises in April. Costs for a typical household will rise from £1,277 per year to £1,971 per year, up by 54%. It is unlikely that switching can bring this down – the cheapest fixed deal is 68% more expensive than the cap, says MoneySaving Expert. Fixing could provide some certainty about future price increases, but will leave you paying more than you need if prices drop.

Find every way to cut waste

The next step is reduce the amount of energy you use. Chip away at your heating bills by switching off radiators in unused rooms and blocking up draughts. If you can afford to do so, spending some money on improving your home’s energy efficiency today will cut your heating bills for years to come. Houses in energy-efficiency band F will typically cost £400 a year more in heating bills from April than those in band C, says the Energy & Climate Intelligence Unit. Investing in loft and wall insulation will help improve your home’s energy efficiency. Beyond heating, try to reduce electricity bills by turning off appliances when they are not in use.

Energy is the biggest bill for most people, but look for other costs to trim. Check you are on the best deal for phones, broadband and insurance. Take an axe to those small direct debits that add up. We spend an average of £500 a year on subscriptions, says Jeff Prestridge in The Mail on Sunday. “If there are streaming services, gym memberships or food subscriptions you are not getting good use out of, now is the time to ditch them.”

Get all the help you can

Government assistance is limited. All households will get a £200 rebate on their energy bills in October, but will have to pay that back at £40 a year for five years from 2023. Houses in bands A to D in England will get a £150 rebate on their council-tax bills in April. But you should also check if you are missing out on any state benefits that could help (such as the winter fuel payment), using a website such as Turn2Us or EntitledTo. Energy and water firms have various measures to help people who are unable to pay bills – see energy regulator Ofgem for more. Charities such as National Energy Action may be able to provide advice.

Recommended

Despite the crypto crash, bitcoin still has a bright future
Bitcoin & crypto

Despite the crypto crash, bitcoin still has a bright future

Cryptocurrencies have crashed hard, with bitcoin down by more than 50% from its peak. But, says Dominic Frisby, bitcoin still has a future – it is the…
19 May 2022
Do Kwon: the King of Crypto Lunatics
People

Do Kwon: the King of Crypto Lunatics

Cryptocurrency entrepreneur Do Kwon liked to ruffle feathers and stir things up in his industry. But the collapse of his empire has left investors des…
19 May 2022
Tech stock crash – dotcom bust 2.0 is upon us
Tech stocks

Tech stock crash – dotcom bust 2.0 is upon us

It’s carnage in the tech sector as the market crashes. But that spells opportunity for canny investors, says Matthew Lynn
19 May 2022
Three things you should learn from Bill Ackman's brilliant Netflix trade
Investment strategy

Three things you should learn from Bill Ackman's brilliant Netflix trade

Hedge fund guru Bill Ackman has lost $400m selling Netflix shares. John Stepek explains why this was a brilliant trade, and outlines three things that…
19 May 2022

Most Popular

Get set for another debt binge as real interest rates fall
UK Economy

Get set for another debt binge as real interest rates fall

Despite the fuss about rising interest rates, they’re falling in real terms. That will blow up a wild bubble, says Matthew Lynn.
15 May 2022
Is the oil market heading for a supply glut?
Oil

Is the oil market heading for a supply glut?

Many people assume that the high oil price is here to stay – and could well go higher. But we’ve been here before, says Max King. History suggests tha…
16 May 2022
Value is starting to emerge in the markets
Investment strategy

Value is starting to emerge in the markets

If you are looking for long-term value in the markets, some is beginning to emerge, says Merryn Somerset Webb. Indeed, you may soon be able to buy tra…
16 May 2022