What to do if you are struggling with your finances

More than half of people who turn to Citizens Advice for debt advice now don’t have enough income to cover basic costs, the charity has revealed.

The number of people with a ‘negative budget’ has increased significantly in recent years, up from just over a third in 2019.

Having a negative budget means that someone does not have enough income to cover basic needs such as housing costs, utility bills and grocery costs.

According to the charity’s Living on Empty report, the annual income people seeking debt relief need to avoid a negative budget has more than doubled since 2019, from around £7,000 to more than £15,000.

Inflation is currently at 8.7 percent, but spent much of last year in double digits.

Even if inflation continues to fall, prices will remain much higher than before the pandemic, increasing pressure on poorer households.

Rising energy costs have been a major part of the pressure on the cost of living.

These have hit the poorest households the hardest, as they spend a higher proportion of their income on essential bills.

However, the increased cost of other essential expenses, such as mortgage payments and childcare, has also risen, with grocery bills nearing all-time highs.

Tenants who need help with debt counseling report that average rental costs have increased by 25 percent since 2019.

Moreover, benefit recipients now receive less in real terms, according to Citizens Advice.

The charity said benefits have eroded significantly since 2010 due to cuts, freezes and increases below inflation.

But not only benefit recipients are dragged into the red.

Data from Citizens Advice shows that traditionally better-aligned groups are also being undermined.

Lauren Peel, director of consumer insights and propositions at the non-profit Fair4All, said: ‘The utility bill support has been removed, inflation is higher than anyone expected for such a long period of time – and then there’s the drastic rise in mortgage rates . .

“It’s fair to say that the cost-of-living crisis is getting worse and is affecting different people in different ways.”

What help is available if you struggle with bills?

If you have a bad credit history, you’re unlikely to be able to get a loan from well-known lenders, though nonprofit lenders and credit unions are more likely to approve an application, Peel said.

“Responsible lenders don’t lend to someone who can’t pay it back,” she said.

“One of my big messages is, if someone is willing to lend to you and you have a negative budget, especially if they don’t do audits, that’s probably a loan shark.”

Groups that have traditionally been better off are now at risk of falling into negative budgets due to inflation.

However, she says if your spending is hit by heavy debt, credit unions may be able to help by consolidating payments and offering you a lower interest rate.

A first option for those struggling with a negative budget is to make use of online benefits calculators And tools for checking grants.

That of the government Money Advice Service can help you with this, or you can see for yourself whether there are benefits to which you are entitled and which you are missing out on.

Every year around £19bn in benefits and social rates go unclaimed because people don’t realize they qualify or are embarrassed to take them up.

This stigma around finances is a major deterrent to people getting the help they need.

Contacting your service providers, such as for electricity or gas, to let them know you’re struggling is an important step in getting help.

Many companies have made arrangements to support customers with financial difficulties.

It’s also important to figure out which payments should be prioritized, says Ali Russell, CEO of Grant-making Trust the Benevolent Fund.

She points to Citizen advice and services as supported by the government Money helper as places where people in need can go for advice.

However, she warns that many of them, as well as honest lenders and grant organizations like hers, are under tremendous pressure.

The Benevolence Fund is currently having to close for days as it is overwhelmed by the number of applications from people seeking help, many in complex financial situations.

‘None of the [Citizens Advice] report shocks me,” Russell said. “It’s what we’ve seen over the past six months. There is not enough resource. We would love to help everyone, but we just can’t.

“A lot of referrals from other organizations because they’re overwhelmed too.”

A bigger problem arises when debt is compounded.

For example, if someone gets into financial difficulties such as rent arrears, it gets worse, many take out a loan. If they’re lucky, it’s with a responsible lender, but if they’re not, it could be with a loan shark or other high-interest provider.

By the time these cases get to the Fund, says Russell, “the situation is so complex and dire that it’s harder for us to find a meaningful way to help.”

Don’t struggle alone: ​​Financial worries can also affect mental health, and experts recommend seeking help with management

However, Peel says banks are becoming increasingly proactive in identifying customers at risk of financial distress and offering cost-cutting measures such as interest-free overdrafts.

If you need help, it’s important to ask as soon as possible, she says, and not be afraid to seek support for the impact of financial hardship on mental health.

Peel added: ‘It’s a constant grind and tremendous resilience is needed when it’s not clear when the rainy day will end. That leads to depression and other problems.

“Call Mind, call Samaritans, don’t be ashamed of this. It has a huge impact on people, it’s impossible to get rid of it.’

Credit unions and responsible financiers can be found at Find your credit union And Find finance.