Guidance for Dealing with Personal Financial Difficulty
Financial difficulty is one of the hardest things an individual can ever face. If you can’t afford to live your day-to-day life, stress and worry can appear never-ending.
Thankfully, there are a variety of options available to help you deal with your problems. These range from simple budgeting tricks to more formal personal debt solutions.
In this guide, we’ll be exploring how you can boost your income, cut your expenses, and get rid of any problem debts.
Contents
Work Out Your Budget
Budgeting is always a good idea, regardless of your financial situation. It lets you identify your disposable income and spot where you can cut costs.
Start by identifying your total monthly income. This includes your wages, benefits, and any support payments you might get from your friends or family.
Next, figure out your total essential costs. Include your rent/mortgage, utility bills, and council tax.
Then, you’ll need to review the rest of your expenditures and determine how much you’re spending on living costs and non-essentials. Living costs are things like food, travel, clothing and toiletries. Anything else is non-essential.
Finally, subtract your total expenditures from your income. If you have spare money left over, great! If not, you’re in a budget deficit. Try removing non-essential costs and reducing living expenditures until you reach a point where you have money left over.
Don’t worry if you can’t cut down enough costs to get out of the budget deficit – there are plenty of other tricks to help you get back on top of your finances. These include claiming to increase your income and using debt solutions to reduce expenditure.
What Benefits Can You Claim?
If you’re struggling to meet the costs of day-to-day life, benefits are one of the first things you should consider. If you’re eligible, you could claim up to £200-£400 a week.
You might be able to claim benefits if you’re:
- 16 years or older
- Have a low income
- Sick or disabled
- Suffering from a mental health condition
- Of state pension age (66)
- A carer (either full or part-time)
- A parent or guardian
You can review the various benefits on offer by exploring the tabs below.
This is the primary benefit for most adults. It was introduced to streamline the benefits system and to ensure that people will earn more money in work than on benefits. This means that you can claim Universal Credit even if you’re employed full-time.
To be eligible for Universal Credit, you must:
- Be over 18 years old
- Be under the State Pension age
- Have less than £16,000 in savings or investments
There isn’t an income cap for Universal Credit. Eligibility depends more on your circumstances. If you can show that you’re struggling to get by, chances are you’ll be able to claim. How much you’ll receive depends on circumstances such as where you live and if you have any dependants.
Jobseeker’s Allowance is a benefit provided by the government to financially support those looking for work.
You can claim Jobseeker’s Allowance if:
- You’re unemployed
- You’re working less than 16 hours a week
- You’ve worked and paid National Insurance in the last 3 years
- You’re looking for full-time employment (at least 35 hours a week)
- You’re not in full-time education
If you’re 18-24, you can expect to receive up to £71.70 per week. If you’re 25 or over, you can claim up to £90.50 per week.
You can claim Jobseeker’s Allowance for up to 6 months. It’s typically claimed alongside Universal Credit.
You can claim a Personal Independence Payment (PIP) if you have a condition that is affecting your ability to handle everyday life. This includes illness, disability and mental health problems.
To qualify for PIP, you must:
- Have struggled with everyday tasks for at least 3 months
- Expect to be impacted for another 9 months
- Be at least 16 years old
Unlike other benefits, you don’t need to have a history of work or be seeking employment. It also doesn’t matter what your financial situation is.
Your condition does not determine how much you’ll receive. Instead, it’s determined by how much it affects your day-to-day routine. You can claim between £70 and £100 per week.
The Employment and Support Allowance is designed to help those with conditions that limit their ability to work. The ESA will cover your living costs and help you get back to work (if possible).
You can claim ESA if:
- You’re at least 16 years old
- You have a condition that affects your work
- You have made 2-3 years’ worth of full National Insurance contributions
You can’t claim ESA alongside Jobseeker’s Allowance or Statutory Sick Pay, but you can claim it with Universal Credit. This will reduce the amount of Universal Credit you receive.
ESA is paid in 2 different brackets. If you’re able to work in the future, you’ll receive up to £90.50 per week. If you can’t work, you’ll get up to £138.20 per week.
If you regularly provide care for someone, you should be able to claim some carer’s benefits.
You should be eligible if you’re:
- At least 16 years old
- Not in full-time education
- Spending at least 35 hours per week caring for someone
- Earning less than £151 per week (after tax)
Carer’s allowance is currently set at £81.90 per week. You can claim it alongside Universal Credit.
Child benefit helps you reduce your costs by paying towards your children’s expenses.
You can claim if:
- You’re a caregiver to your child
- Your child is under 16 (or under 20 if they’re still in education)
You can claim £25.60 per week for your first child and an extra £16.95 per week for each additional child.
You can also claim additional Guardian’s Allowance if you’re looking after someone else’s children.
When your partner dies, it can have a massive financial impact on your household. Thankfully, the government does provide bereavement benefits.
You can claim bereavement support if:
- Your partner died after 6 April 2017
- You were married
- Your partner paid 25 weeks of National Insurance in 1 year (or died because of an accident at work)
You’ll get £2,500 per month if you didn’t have children or £3,500 if you did have children. The sooner you apply, the better. You’ll get paid less if you apply 3 months after your partner has passed away.
The government introduced the Household Support Fund to help families struggling amidst the cost of living crisis. You can use it to help pay for bills, food and other essentials.
You’ll need to apply to your local council to get the support. It is distributed at their discretion, meaning it’s up to them to decide who is eligible. Generally, if you can prove you need support, you’ll get it.
The scheme is running until the 30th of September, 2024.
Could You Reduce Your Council Tax Payments?
One significant way you can reduce your costs is by reducing your Council Tax. If you’re on a low income or claim benefits, you could reduce your bill by up to 100%.
You do this by contacting your local council and requesting a Council Tax Reduction.
They’ll need details about your income, assets, benefits, and the number of children and adults living in the house. Once they’ve got all the information they need, they’ll assess your situation and determine if you’re eligible.
You can also reduce the cost of your Council Tax bill by paying it over 12 months instead of the usual 10. This means you’ll have to pay in February and March, but your monthly costs will be reduced.
Getting a Council Tax Reduction and spreading your payments over the whole year will make things much more affordable.
Could You Save on Property Costs?
Another way to cut costs is by reviewing your property costs. Rent and mortgage payments are typically some of our biggest monthly expenditures, so cutting these down can provide real financial breathing room.
If you rent, moving to a cheaper place might be worth considering. If you own your own property, downsizing could be a good idea. You might enjoy where you live, but if it puts you under financial strain, the stress just isn’t worth it.
Another option for property owners is to extend the term of your mortgage. Doing so will let you reduce your monthly costs without the need to move. You can extend your mortgage by a considerable length of time, allowing for sizeable savings.
Remember, though, that extending your mortgage will allow more time for interest to build up—this means you’ll end up paying more in the long term despite your individual payments being less.
Applying for a Charitable Grant
A grant is money, products, or services you don’t need to repay. Some pay for utility arrears, while others provide essential household items like washing machines.
Getting a grant can be a major lifeline when you’re in tough financial straits.
Various charities provide different grant funds. Each has its own eligibility criteria, so it’s hard to say definitively if you’ll qualify.
Generally, though, they’re reserved for people with low incomes or in a state of financial need. If you’re struggling to make ends meet, you should definitely check what’s available.
If you receive grant payments regularly, they won’t be counted as income. This means they shouldn’t affect any benefits you might claim.
Big, one-off grant payouts, however, will be counted as capital. This means they could potentially affect your benefits if they push your total assets above £16,000.
You should speak to a benefits adviser to make sure getting a grant won’t cause you any problems.
Consider a Personal Insolvency Solution
Personal insolvency solutions are legal procedures that help you get out of debt. Some stretch out your debt repayments, while others write off your debt completely.
They’re a great option if your debts are too high to repay through some extra benefit income.
Entering into an insolvency solution can eliminate historic problem debt and give you a much-needed reset on your finances, making daily life affordable again.
You can browse the different insolvency solutions available by exploring the tabs below.
An Individual Voluntary Arrangement allows you to deal with your debts while avoiding bankruptcy. It’s ideal if you’re struggling with unaffordable debt but have assets you want to protect.
- Stretches out repayments over 5-6 years
- Reduces monthly costs
- Protects home and vehicle from seizure
- Allows some debts to be written off
Our team will work with you to sculpt a proposal that is affordable for you and attractive to your creditors.
Despite what you may think, declaring bankruptcy can be one of the best ways to get back to a debt-free life.
- Writes off all debt after 12 months
- Stops pressure from creditors
When you declare bankruptcy, your assets – such as your home and vehicle – are seized so that they can be sold to repay creditors. If you don’t really have any assets, bankruptcy can be a rapid and cost-effective solution.
Debt Relief Orders were designed to help people with low incomes and little assets get out of debt.
- Writes off all debt after 12 months
- Stops pressure from creditors
A DRO operates just like bankruptcy; you’re subject to some restrictions, and then after a year, all of your debts are written off. The difference is the price. Declaring bankruptcy costs £680, whereas entering a DRO is completely free.
To be eligible for a DRO, you must not have more than £75 per month in disposable income. Additionally, you must not own more than £4,000 in assets.
A Debt Management Plan is a payment plan agreed between you and your creditors.
- Stretches out repayments
- Reduces monthly costs
- Helps protect your assets
You’ll agree to keep up with regular payments. In exchange, your creditors will agree to let you repay your debt over a longer period. They’ll also agree not to pursue any debt-collection efforts against you.
Remember that a DMP is not legally binding. This means creditors can ditch the agreement at any time, even if you keep up with repayments (although they’re unlikely to do this).
Speak to an Expert
If you’re struggling to get by and think you could benefit from a personal insolvency solution, speak to one of our team.
Our expert insolvency practitioners can assess your situation and let you know which option is best suited to your needs.
Get in touch today to book a free, no-obligation consultation.
