If you have some responsibility for looking after your household’s money, it can feel very daunting. But getting on top of it can really pay off.
Some of the most important things to prioritise when looking after your family’s finances are budgeting and bills. If you take care of both of these, then you will be well on your way to making sure your household’s money stays on track. And it can help you in the future too, as you will also learn some really useful life skills.
Creating a budget and tackling your bills are particularly important if you are already a little under water, and have some debts building up. If this is the case for your family, it is crucial that you don’t bury your head in the sand and hope the problem will sort itself out. Debts just grow and grow if you don’t do something to tackle them, and they can very quickly get out of control. So it is always a good idea to get on top of your finances as soon as possible.
Below we discuss how to create a budget for your household so that you do not spend more money than you have coming in. We also give our tips for how to keep your bills as low as possible, as well as potential support you could receive if you are struggling to pay them.
Budgeting
One of the best things you can do for your family’s finances is making sure you have a budget in place. Here we explain what budgeting is, why you should do it, and how to go about making your own budget.
Budgeting is the process of making a plan for how you will spend your money. It involves understanding how much money you have coming in, working out in advance what you will spend it on and then tracking your spending to make sure you stick to it.
Budgeting is the best way to make sure that you balance your income against your spending. Budgets can give you great peace of mind, and make you feel more in control of not just your finances but also the rest of your life too.
Without a budget, it is very easy to accidently spend more money than you have, creating debt. Debt can be very expensive and can spiral out of control quickly so it is important to try and avoid it if you can. If you or your family already have debt, then a budget can be a good way to work your way back out of it and be debt-free in the future.
Budgeting can also help you look at what you are spending and decide if it is the best way to spend it. You might find through budgeting that you are spending money on things that you don’t think are necessary or important and that you could instead be using that money for things that you would value more. This means you can make the money you already have go further towards the things you want.
A budget can also be great if you have something particular in mind that you want to do, such as going on holiday or buying a computer game, but you are not sure how you will get the money you need for it. Through budgeting, you can make sure you set aside money regularly towards these goals. This can really add up and you may end up being able to afford things you might previously not have thought possible.
Preparing a budget can be a little time-consuming at first, but it becomes much quicker once you get going. There are lots of budgeting apps available that you could use, or a simple Word or Excel document or pen and paper work just as well. Budgeting for your household is likely to be more successful if you involve the rest of your family in the process too.
There are a number of steps involved in preparing a budget:
Think about all the different ways that your household receives money. You might need to ask the other members of your family to find out all of this information.
It could come from a number of different sources including:
- Money earnt from any jobs that you or other members of your household might have.
- Money from any benefits your family are entitled to, including things like Child Benefit.
- Money that comes in if your family owns any property and rents it out.
Income like this, that comes in regularly and is usually roughly the same amount each time, is known as your ‘fixed income’.
How often you receive this fixed income might be a good way to decide how to set up your budget. For instance, if your main source of income comes in monthly, then you could set up your budget to cover a month. But if you receive it every two weeks, you may want your budget to cover a fortnight instead.
You might also receive other sources of income that don’t come in so regularly, for instance when a relative gives you some money as a gift or if you decide to sell something you no longer need. This is known as ‘extra income’. Because this money is irregular, it shouldn’t be counted on to pay for your essentials.
Once you have added up how much money you are due to have coming in, you have an idea of how much you will have to spend.
The next step is to see what the household’s money is currently being spent on. Some of this is relatively easy to think of, like big regular expenses such as rent or mortgage. But some of it is more difficult to remember such as if you buy a snack while you are out and about.
A good place to start is by gathering up all of the household’s bills, bank statements and receipts. From these, take a look at all of the spending, and separate it into ‘essential spending’ and ‘extra spending’. Essential spending is for things that you absolutely need to spend money on such as mortgage payments or rent, basic food shopping and utility bills. Extra spending is for things that are nice to have if you are able to afford them, such as new clothes, presents, day trips or meals out.
Now add up all of your essential spending and separately all of your extra spending. You will now have an idea of how much money you have going out every month.
Compare your fixed income against the total you calculated for your essential spending.
If your fixed income is more than your essential spending, then you are in a relatively stable position.
If this is the case and your household has existing debts such as overdrafts, loans, store cards or credit cards, it could well be best to pay some of these off with any extra income you have, as they are probably costing you money every month. If there are multiple debts, prioritise those with the highest rates of interest as they will be costing you the most money.
If your family doesn't have any debts, then you may want to put some or all of this extra money into a savings account to create an emergency fund for your household. This is a pot of money that is available in case something unexpected happens such as the car breaks down or you need a new washing machine. Or you could save some of it up to put towards something particularly special such as a family holiday.
If, however, your fixed income is less than your essential spending, then you will need to do something to tackle this situation by either increasing your income or decreasing how much you are spending.
It can often be difficult to find extra sources of income, but a family member may be able to take on more hours at work or you may be entitled to additional benefits or grants which could help boost your income. Take a look at our guides ‘Grants to support you as a young carer’ and ‘Checking the benefits you can claim as a young carer’ to find out more about these areas.
It is usually easier, however, to find cuts that can be made to your spending instead. It is worth thinking about all of your expenses in some depth to decide where you can cut back to make your budget balance. You may be able to find ways to lower your bills – take a look at our tips below for some ideas on how to do this. Or you may be able to save money through making some simple swaps, for instance buying supermarket own brand products rather than branded ones, making your lunch at home rather than buying sandwiches on the go, or drinking tap water rather than fizzy drinks. Or you could have regular expenses going out every month that are not completely essential, such as a streaming service subscription or a gym membership, which you may be able to go without for a bit.
Once you have managed to find ways to make your fixed income balance against your essential expenditure, don’t stop there! It is important to keep on tracking both your income and expenses. Try to find half an hour at least once a week to take a look at your budget and check how it is going. This is to make sure that if anything changes, such as your electricity bills go up, you can tweak your budget to make sure that you find the money to pay for this elsewhere. Keeping a track of your finances like this will also allow you to notice what you are spending in general and make you less likely to waste money on things you might not need or want that much.
Bills
Household bills will likely make up a big chunk of the money that your family spends. They could cover a number of different things including mortgage, rent, Council Tax, TV Licence, broadband, mobile phone, landline phone, electricity, gas or water. These bills often count as essential spending because you usually can’t just decide you don’t want the service that they are billing you for anymore; you will always need running water and electricity, for instance.
It is important to try and keep on top of paying your bills as much as possible. If you get behind on your payments it can have lots of consequences. If you miss a payment or two, for instance, the company could demand you pay a whole year’s payments in one go rather than in monthly instalments. If you continue to not pay, then you could have legal action taken against your family, including having bailiffs coming to take away the things you own and even possibly having to go to court.
One way to stay on top of your bills is to keep them as low as possible, which will make it easier to afford them. Below we give some ideas of ways you can cut your bills. Taking a small amount of time to implement these changes could save your family hundreds of pounds, so it can be really worth the effort. We have also included information about sources of support you can get if you are struggling to keep on top of your bills.
For some bills, such as electricity or gas, you can lower the amount you spend by cutting down on how much you use. You might be amazed how much money you can save through some easy changes. Try and bring your whole household onboard with these changes, to make sure you are saving as much as possible.
For energy bills, there are lots of simple steps you can take to cut down on your usage and reduce your payments. For instance, you could save:
- £40 a year by replacing your lightbulbs with LED bulbs.
- £100 a year by fitting a showerhead that is more water-efficient.
- £55 a year by turning your appliances off at the plug instead of leaving them on standby.
- £14 a year by reducing your dishwasher use to once a week.
- £20 a year by turning off the lights when you’re not using them.
- £28 a year by only using your washing machine more carefully.
- £70 a year by keeping your shower time to just 4 minutes.
- £11 a year by only filling the kettle with the amount of water you need. [1]
There are also schemes available that can help you get your family’s house adapted to make it more energy efficient, such as installing insulation or changing your boiler. Some of these schemes are provided by the government, and others by energy suppliers or local councils. A number are open to anyone, and others are just for people with low incomes or who receive certain benefits. Take a look at the Turn2us website for further information.
If you have a water meter and want to lower your bills, then it could be worth thinking of ways you might be able to use less water. Some ideas include:
- Taking a shower rather than a bath – it uses only a third of the water.
- Turning off the tap when you brush your teeth.
- Watering your garden with a watering can rather than a hose.
- Fully loading the dishwasher or washing machine rather than running smaller loads.
- Installing what is known as a ‘toilet hippo’ which can save up to three litres of water every time you flush the loo.
It can also help to check that you don’t have any leaks that might be increasing your water bills. Even something as simple as getting a dripping tap fixed can make a big difference. Each one wastes at least 5,500 litres of water a year, which is enough to fill a paddling pool every week all summer. [2]
It can be worth bearing in mind, however, that in some cases, changing your usage will not make any difference to your bills. If you do not have a water meter installed, for instance, then cutting down on how much water you use will make no difference. And other bills like Council Tax or TV Licence are not affected by how much you use the services you are paying for.
You could save a lot of money just by switching to a different provider. Regularly changing the company that provides your mortgage or energy, for example, so that you get the best available deal at the time could save you hundreds of pounds every year.
A good place to start is by using what is known as a price comparison website. It is worth just taking a look to see how much you might be able to save if you were to switch, as you may be surprised how much it is. The government estimates that most people can save over £200 a year by changing energy provider, for example. [3]
Even if you are keen to stay with your current providers, it is still worth contacting them to see whether they can provide you with a better rate. If you are on what is known as the ‘standard variable tariff’ for your gas or electricity, for instance, you might be able to save a lot by just changing to a different tariff or to a different payment method such as Direct Debit. It is also worth asking whether they have any reduced-rate social tariffs for people in your circumstances. Some energy companies even provide vulnerable customers with other support to help cut their bills such as insulation or draught-proofing.
It is worth knowing that there are some bills that you cannot lower in this way though. For instance, you cannot switch who you pay your Council Tax, TV Licence or water bills to, as you have no choice over your supplier for these services.
Many organisations such as energy suppliers or water companies have their own charitable trusts and funds which you can apply to for support if you are struggling to pay your bills. Each of them makes their own decisions about who to support, so it worth looking into your particular supplier’s hardship fund to see whether you are able to apply. They may also have reduced rates for people with low incomes or on particular benefits, sometimes known as ‘social tariffs’, which it might be worth asking about too.
The British Gas Energy Trust also offers grants to anyone who is in fuel debt, which means they have not been able to pay their gas or electricity bills, even if you are not a British Gas customer. You can find out more on their website.
WaterSure is a scheme that can help to keep the cost of your water bills down. It works by capping your bills so that you do not pay more than the average metered bill in your area. If your metered bill ends up being lower than this cap, then you will only have to pay for the water you use. If you want to see whether you use enough water to be worth applying, then you can contact your water company to find out what their cap is.
In order to apply, you must have a water meter and receive certain benefits. These usually include:
- Universal Credit.
- Income-based Jobseeker's Allowance.
- Income Support.
- Income-related Employment and Support Allowance.
- Pension Credit.
- Housing Benefit.
- Working Tax Credit.
- Child Tax Credit awarded at a rate higher than the family element.
The exact benefits that are covered vary a little between water suppliers, with some also covering Disability Living Allowance and Personal Independence Payments too. It is best to contact them to find out if your household would be eligible.
You must also have what they call a high essential use of water. This means that, due to certain circumstances, you need to use a lot of water. This could be because there are three or more children who are under 19 and are in full time education living in the house. Or it could because someone living there has a particular medical condition. Certain conditions automatically qualify including:
- Desquamation (flaky skin disease).
- Weeping skin disease (eczema, psoriasis or varicose ulceration).
- Incontinence.
- Abdominal stomas.
- Renal failure requiring dialysis at home.
- Crohn's disease.
- Ulcerative colitis.
If someone in the house has another condition which means you are likely to use more water than normal, then you can still apply but they may ask for further details from a doctor about the condition and how it affects the amount of water you need to use.
You can apply for WaterSure by completing a form provided by your water company. They may need evidence from you, including details of the benefits your household receives and any relevant medical conditions.
Your water company will tell you whether you will need to reapply again every year for the WaterSure scheme or not. Be sure to let them know if your circumstances change and you are no longer eligible for support.
Some energy providers take part in what is known as the Warm Home Discount scheme. This allows some people to have a one-off annual discount of up to £140. The discount is applied to one electricity bill issued between October and March.
The scheme primarily helps pensioners. But other people on a low income who receive certain benefits may also be entitled to the discount, if there is enough money left in the scheme after pensioners have received support. If there is funding left, then it usually works on a first-come-first-served basis so it is important to apply as soon as you can when the scheme opens. Your electricity supplier decides who is eligible and how to apply, so you should contact them directly for further details.
If your current energy provider doesn’t take part in this scheme and you think you would be eligible, it may be worth switching provider to one that does participate. The GOV.UK website lists the companies taking part.
If someone in your household is on particular benefits, you will be entitled to a Cold Weather Payment if the average temperature where you live drops to 0°C or below (i.e. freezing) for seven days in a row.
You will receive £25 for every week that the temperate drops this low between November and March every year.
You do not have to apply for this; the payment will be paid automatically in their benefits.
The government provides a Cold Weather Payment tool for you to check if you are due to get a payment.
LEAP (Local Energy Advice Partnership) is a free energy and money-saving service for people who struggle to pay their energy bills. They can come to your home and fit free LED light bulbs and draught-proofing measures to help cut your energy usage. They can also check that you are on the best tariff from your supplier and tell you more about other funding you might be able to access. If you would benefit from a free money advice consultation they can also arrange this too.
Your family could be eligible for help from LEAP if they are in receipt of certain benefits, on a low income, have a particular medical condition or a disability.
Take a look at the LEAP website for more information.
Depending on your circumstances, you may be eligible to either receive a discount on your Council Tax bill or be exempted from paying it entirely.
For example, if you are a full-time student and you share a house only with other full-time students, then you are exempt from paying any Council Tax. If you live alone, then you are eligible for a 25% discount on your bills. Some councils also exempt care leavers from having to pay Council Tax too. If you are in receipt of certain benefits or on a low income, then the help you get with your Council Tax will depend on where you live as each council runs their own support scheme and gets to set their own rules.
If you need to live in a larger property because someone living there has a disability or if you have had home adaptations for a person with disabilities which means the house is now in a higher Council Tax band, then you may want to look at the Disabled Band Reduction Scheme. Under this scheme, the person you care for might be entitled to a discount on the Council Tax on their property. You can find out more on the GOV.UK website.
If none of these options work for you and you are still struggling to pay your bills, then it is important to speak to the companies involved as soon as possible. They may allow you to spread your payments out using a payment plan, to make it easier to keep on top of them.
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