The cost of living crisis has been challenging for pretty much everyone.
Money simply isn’t going as far as it used to with hikes in energy, fuel, food and more!
While some people may have had a small amount of savings that built up during lockdowns, it appears that the safety blanket is starting to be pulled out of many people.
A recent survey by Hargreaves Lansdown shows that 6% of people have started borrowing for the first time since the cost of living crisis began, and 8% are borrowing more.
Separate research from the Office of National Statistics (ONS) has shown that people are feeling more pressure, with around 25% of people needing to borrow more in the past month alone.
Younger people, women, renters, and parents are groups borrowing more, whereas men and higher earners have stopped borrowing as much to protect their finances.
- 1 in 10 women are borrowing more
- 16% of 18-34 year olds have started borrowing money for the first time
- 13% of single people are borrowing more compared to 6% of married couples
- 14% of parents are borrowing for the first time, and 12% are doing it more
We asked the UK Money Bloggers and Content Creators Community for their thoughts on the short-term and potential long-term impacts of borrowing more money.
They’ve also shared tips and ideas to help protect your finances.
Do You Have a Budget?
Joseph, from Thrifty Chap, explained that it’s a good idea to go back to basics on a budget before deciding to borrow any more money.
He told us:
“Before borrowing, get to know your money. So many people think they need to borrow when in fact, they haven’t gone through the process of what is coming in and where they are spending. Set up a spreadsheet, figure out where every penny is being spent and you might figure out where a couple of changes can make a big difference. Borrowing to maintain a current lifestyle will lead to debt. If you cannot afford the lifestyle, change the lifestyle first. Living within your means is more than a cliche.”
Similarly, Connor McAuley, from Foundered, suggests planning your budget carefully, and adapting what you shop for.
“The price squeeze due to the cost of living crisis has seen many people trading down in what they buy. Choosing own brands over premium brand as an example. The challenge has been for those who were already buying lower cost alternatives. With nowhere else to go, they need to absorb the increase or reduce what they spend. And that’s not always possible.
“Setting a budget is the cornerstone of good financial well-being, but it’s so seldom used. With a little bit of planning, it can help reduce the impact of these costs and potential for going into or further into debt.”
Yorkshire Finances also suggested relooking at your debt overall to ensure you can live within your means.
They told us:
“Borrowing to fund regular expenses is a debt trap to avoid! If you’ve already found yourself slipping into your overdraft, or not being able to fully pay off your credit card each month, draw up a new budget to make sure you’ve got more coming in than going out. Then (if needed) you could attempt to consolidate your debt onto a 0% credit card while you pay it off. If that’s not possible, speak with your bank – they can help to review your options. But ultimately, if you’re spending more than you’re making, you will need to spend less and/or earn more.”
Get Debt Help Before It Takes Over
Borrowing may feel like a quick fix when you can’t see the wood for the trees. However, it can create a debt trap spiral.
Sara Williams, debt expert at Debt Camel, told us:
“If you are borrowing to pay for everyday essentials such as bills, petrol, groceries, children’s clothes – then you may be making this month easier but the next month gets worse… And it gets harder to sort out your debts. Talk to a good debt adviser about your options and their pros and cons – here is a list of recommended places depending on your situation and the types of debt you have”
Neil Doig, from Money Tipps, was keen to flag the risks of borrowing money.
He told us:
“In today’s consumer-driven world, it’s crucial to understand the dangers associated with debt.
“The allure of easy credit can lead to financial pitfalls if not approached with caution. By exploring the mathematics and numbers behind consumer debt, we can shed light on its potential impact on personal finance. If you can, prioritize lending over-borrowing, differentiate between good and bad debt, and recognize the profit-driven motives of credit card companies will allow you to take control of our financial futures. I have listed my top 8 tips for avoiding debt in this article.”
Find Ways to Boost Your Income
Getting a pay rise at work doesn’t happen for most of us.
However, that doesn’t mean there aren’t other ways to increase the money you have coming in to balance out the increase in bills, and then avoid borrowing at all.
Laura Turner, who runs Thrifty Londoner, told us,
“Instead of borrowing, an alternative that might be feasible to some could be finding ways to earn more money to plug the gap (depending on how large.) This could be a service based side hustle in the local community such as dog walking, pet sitting or babysitting. Or could be finding freelance work using existing skills such as copywriting, data entry or transcription.”
Ricky Willis, from Skint Dad, suggested checking that you are receiving all the support you can get financially.
He told us:
“There are millions of people who are entitled to money through the benefits system but are simply not claiming it. It can seem daunting to know where to start, but you can use the calculator on the Turn2us website to find out what you’re missing out on.”
You may think that a credit card, overdraft or loan from your bank or building society are your only options, but there are potentially cheaper ways to borrow money.
Claire Stitt, who writes at Stapo’s Thirfty Live Hacks, suggested finding a cheaper rate from your local credit union.
She told us:
“Borrowing should always be the last resort. If you’re finding that you’re not able to make ends meet, then in the first instance, you should take a close look at your spending and try to make cutbacks where you can.
“If you do need to borrow some cash, then make sure you’re borrowing from the right sources. Local credit unions often offer low-rate loans to people that live within the community (for example). If you do borrow money, you need to be sure that you’ve borrowed from a reputable source, that the interest rate is fair and that you can meet the terms and conditions and pay the money back on time.”
Could Debt Consolidation Work?
If your credit file is in good health, and you currently have outstanding debt, which you’re paying interest on, shifting your debt could be an option.
(However, be aware that opening too many credit accounts in a short time frame can have a negative impact on your file and may mean you get turned down for future credit products).
Nick Daws, from Pounds and Sense, told us:
“It’s always best to avoid borrowing if possible. But if there really is no alternative, it’s worth looking at zero-interest credit cards. As the name suggests, these let you make payments (or transfer debts) without paying interest, for periods from a few months to two years or more. They can provide a method for funding essential purchases you couldn’t otherwise afford. But note that you will still have to make a minimum repayment every month. You will also have to pay off the entire debt before the interest-free period ends, or you will start being charged interest.”
The views given are of the individuals and not UKMB.
The UK Money Bloggers and Content Creators specialise in a variety of personal finance topics.
Get in touch if you would like to feature or interview members of the community.