When the news is full of job cuts and rising prices, it is natural to feel uneasy about money. You cannot control the economy, but you can make your own household finances sturdier, so that a bump in the road does not turn into a crisis.
None of the steps below need you to be a money expert. Most are about getting a clear view of where you stand and building a little breathing room. Start with whichever one feels most urgent for you.
Build up a cash cushion
Savings you can reach quickly are your first line of defence. If your hours are cut or a bill lands out of nowhere, a cushion means you can cope without reaching for a credit card.
Do not worry if you are starting from nothing. Set up a standing order for the day after payday, even if it is only a small amount, and keep the money in a separate easy-access account so it is not mixed in with everyday spending. Aim for one month of essential costs first, then keep going. Our guide to the key numbers in your budget shows how to work out what your essentials actually cost.
Cut costs without making life miserable
Slashing everything at once rarely lasts. You will get further by going after the big, boring bills first, then trimming the everyday spending you will not miss.
- Check your bank statement for subscriptions and memberships you have stopped using.
- Shop around when insurance, broadband and phone contracts come up for renewal. Loyalty does not always pay.
- Plan meals for the week and write a shopping list before you set foot in the supermarket.
- Keep one or two small treats. A budget with no enjoyment in it is a budget you will abandon.
Get on top of your debts
List everything you owe, with the balance, the monthly payment and the interest rate. If money gets tight, not all debts are equal. Rent or mortgage, council tax, energy bills and court fines are known as priority debts, because falling behind on them can lead to losing your home, having your supply cut off or worse. Debt advisers generally say these need to be paid first.
If you have spare money now, some people use it to pay down their most expensive debt first. If you are already struggling, do not wait. Free debt advisers at StepChange and National Debtline can help you make a plan. In England and Wales, the Breathing Space scheme can pause most interest, charges and creditor action for 60 days while you get advice.
Protect your income
Your income is the thing everything else depends on, so it is worth a little time to protect it.
- Find out what your employer pays if you are off sick, and whether you have any income protection or life cover through work.
- Keep your CV up to date and your skills fresh, so you are ready to move if you need to.
- Read up on your rights at work. If you have been with your employer for at least two years, you are usually entitled to statutory redundancy pay if your job goes. GOV.UK explains your redundancy rights.
- Check you are claiming all the benefits you are entitled to, especially if your hours drop.
Avoid panic decisions
Worry can push people into choices that make things worse. A few to watch out for:
- Stopping pension contributions on impulse. If you pay into a workplace pension, you could lose your employer's contributions too. It is worth understanding exactly what you would give up before deciding.
- Borrowing to cover everyday bills. If credit is plugging a regular gap, the gap will still be there next month, only with interest added.
- Answering unexpected offers. Scammers often target people who are worried about money. Check that any firm offering credit is on the FCA register.
Know where to turn for help
If you are worried, talking to someone early makes a real difference. This article is general information, not financial advice. MoneyHelper offers free, impartial guidance on everything from budgeting to pensions, and Citizens Advice can help with benefits, work and housing problems. If money worries are affecting how you feel, Mind has practical information on money and mental health. Small, steady steps now will leave you far better placed, whatever happens next.
