Since the cost-of-living crisis began to bite, one of the most common questions I’m asked is, ‘what help is there for people in financial difficulties?’
The good news is there is support out there if you are struggling financially, though it might not always be easy to know where to turn or what you have to say to get help. In many sectors, there is also a requirement on businesses to come up with tailored help for their customers who are finding it hard to pay their bills.
But there is no ‘standard’ definition of what financial difficulties are – and it’s clear many people don’t know if they are sufficiently in need to qualify for help.
So what are financial difficulties and how do you get help if you need help paying your debts?
What are financial difficulties?
Many of the people who I speak to don’t consider themselves to be in financial difficulties. For lots of people, there’s an assumption that you must be solely reliant on benefits or literally on the point of going bust before you qualify for help.
However, being in financial difficulties simply means your ability to pay your bills is compromised because you don’t have enough money to cover all your expenses. This might be temporary or longer term. Either way, if you’ve got more money going out that coming in – or the amount you’re left with after paying essentials doesn’t cover you for very much at all, least of all emergencies, then you are a candidate for greater support.
People tend to avoid looking too closely at their outgoings when they are worried about money. This is natural and understandable – but it does mean problems get worse behind the scenes and you end up in a much more challenging situation. So to fight back against financial troubles, you need to start by making a basic budget.
The budgeting basics
The vast majority of people hate budgeting. It’s really easy to prevaricate rather than tackle your spending. So make it easier on yourself. Play some music or have the TV on in the background so you aren’t sitting in silence. Grab a cuppa or a glass of wine, take a deep breath, turn on the computer or grab a pad and have a look at your bank accounts. But set yourself a time limit of no more than 30 minutes. Just getting started is the most important thing.
You can download free apps, watch flashy guides on YouTube or check out lifestyle blogs. But budgeting is best when it’s basic. A simple spreadsheet is all you need – or a blank piece of paper.
If you have online banking, you can get a list of direct debits and standing orders with one or two clicks. List out when your regular payments are due each month and total up the cost, then compare it to what’s coming in. In a separate column, include things that you pay as you go, like the food shop, travel and lifestyle spending on things like entertainments and food.
You’ll be amazed how quick this is to do – however, prepare yourselves as you’ll discover how much money you have left over each month in rather stark terms. This is the part where people panic – but don’t. There is help available.
Claim back some cash
Go back 13 months through your bank statements and note down anything that you don’t recognise. Many people are spending hundreds, if not thousands of pounds each year on annual debits for things they neither wanted nor needed. These might be free trials for goods or services you signed up to, or more obvious things, like TV streaming or cloud storage. Why 13 months? Many businesses sign you up to annual payments that might have slipped under your radar. So go back a year and overlap by an extra month and you should spot everything.
Ask your bank to cancel anything you don’t want or need straight away – and claim back the money if you haven’t authorised the payments. You can dispute unauthorised transactions through your bank or card provider or take it up direct with the firm that’s debited you – it’s up to them to prove you said they could take the cash.
Contact your creditors
If you’re worried that your household income is tight or you’re struggling to stay on top of things there’s a lot you can do to tackle the problem before it gets out of control.
The rules about financial difficulties are generally pretty clear in the regulated sectors. If you’re struggling to meet your financial commitments and ask the business for help, they should come up with some solutions for you to help you buy some time while you get back on your feet again. They should also consider suspending interest and charges for a short period if it’s making your situation worse. This doesn’t mean money you’ve spent or owe will be wiped out, but it does mean that money you’ve been charged on top might be refunded if there’s a good reason for doing so. Loan and credit payment holidays are usually available too so ask and explain if you’re struggling.
Mortgage and loan holidays buy you a bit of time to regain control of your finances but bear in mind the money you owe just gets tacked on to the end of the mortgage or loan period and extra interest may still apply.
I spoke to the regulators for the energy, water, financial services and telecommunications services and the Government – and all are clear that they expect businesses to offer a range of solutions for people in financial difficulties that help their specific set of circumstances. These options can include:
- Giving people payment holidays or suspending payments to allow them some breathing space.
- Suspending debt interest and charges and refunding excessive charges that have already been applied.
- Coming up with realistic payment plans that match the customer’s personal circumstances.
- Providing information and support around the best ways to save money on bills and get the cheapest rates and tariffs.
- Regularly assessing how their customers in financial difficulties are managing with their plans and proactively keeping in contact.
- Avoiding debt collection services or cutting off supplies wherever possible.
If you don’t feel that the business is offering you any practical help with your debts, then make a formal complaint and ask them to suspend interest and charges while the matter is looked in to. Many business sectors have free ombudsman and dispute resolution schemes that you can go to if you are still unhappy too.
Get a free debt plan
If your financial difficulties look like they might be longer term, then speak to a free service like StepChange, a charity set up to help people get back on top of their finances. They’ll contact your creditors for you and negotiate payments you can afford. It’s not easy, but it’s a solution. Never pay for a debt management service – there are free options out there. And bankruptcy and IVAs are very much a final option. Don’t go there unless you are all out of other solutions.
Featured in Mirror – Martyn James