Households face £2,000 bills hike by the end of next year – how to avoid it

FAMILIES face forking out an extra £2,000 a year on bills as prices soar.

Figures released yesterday show inflation hit 4.2%, its highest in a decade piling pressure on hard-up Brits.

The higher the rate of inflation the more prices are rising – meaning your money doesn’t go as far and you have to spend more.

Households will also see taxes rise when an increase to National Insurance kicks in next year.

And anyone in debt could see costs increase as the Bank of England is expected to hike interest rates.

The Institute of Fiscal Studies (IFS) calculates that overall households face extra costs of up to £2,000 a year.

Someone earning £30,000 year will be worse off by around £1,420 a year, while in interest rate rise could add £600 a year to average mortgage costs.

Paul Johnson of the IFS said yesterday on talkRADIO: “Earnings aren’t rising this fast.

“Of course we’ve got some big tax rises coming along in April, and all this is going to mean, I’m afraid, is that unless we’re getting pay rises of something like 7%, the buying power of our earnings is going to be less this year than it was last.”

Inflation was pushed up by rising energy and fuel costs, according to the Office for National Statistics.

As the cost of living rises, here’s the steps you can take to keep costs down.

How to save on energy bills

Gas and electricity prices are going up. The standard advice in such a situation is to shop around for the best fixed deal.

But energy suppliers have been pulling their cheapest tariffs off the market as their own costs soar.

Contrary to usual advice, the best thing for people to do at the moment is wait.

If you’re on the standard tariff then you’ll likely be getting a better price right now than you would from a fixed deal. 

If you’re already on a fixed deal then you should be protected from the coming price rises – but you could face far higher prices when it ends.

Instead, households can look at energy saving measures in the home that could cut the cost of bills.

For instance, if you don’t defrost your freezer regularly it could add as much as £150 a year to your bill.

Here’s all the tricks and tips for keeping costs down in every part of your home.

How to save on TV, phone and broadband bills

Energy bills may be almost unfathomable at the moment, but shopping around for your other household bills should be a little easier.

Don’t forget to check your subscriptions, especially with all the streaming services you may have signed up to in lockdown.

Sarah Coles, personal finance analyst at Hargreaves Lansdown, previously told The Sun: “If you’ve consolidated media and broadband into one, this is one of the areas where people have the most success negotiating with their provider. 

“If you haven’t switched in a while give them a call, tell them you’re thinking of switching, and see what they can do for you.”

Virgin Media customers shared how they saved up to £276 a year on bills – just by asking.

How to save on council tax bills

Council tax is one of the biggest bills for households, taking up a large chunk of budget.

It’s a priority bill which means there can be severe consequences for not paying. If you’re struggling with it it’s best to seek help sooner rather than later.

Council tax bills rise each year in April, and they could go up by as much as £250 in 2022 but it’s worth checking now how you can save.

To reduce your bill it’s worth checking if you’re entitled to any discounts or reductions.

Apprentices, students, and carers can get a discount for example, and there’s a 25% reduction if you live alone.

Reductions are available for those on low-incomes, people claiming certain benefits, those caring for others as well as other circumstances.

The amount your bill is reduced by can range from 25% off to 100% which would mean you pay nothing at all for this bill.

As each council offers different support, you’ll need to  for more information and apply through them directly.

You can check the help you could get with council tax bills and other support using a benefits calculator.

How to cut the cost of your food bill

Everyday groceries like apples and sausages have rocketed in price by as much as 20% and food bosses have warned of price hikes.

Inflation could add £180 to family food bills ever week, experts have warned.

Shopping own brand products or switching to a budget supermarket is one easy way to cut your grocery bill.

It’s also worth considering whether you can make use of loyalty schemes like the Tesco Clubcard or Sainsbury’s Nectar card.

Reducing your food waste is another good way to cut costs.

Brits throw away almost 20% of the food we buy, which adds up to £600 a year for the average household.

Plan your meals for the week to reduce waste, and don’t just throw food away if it’s past its best before date – the expiration date is the one you need to look out for.

If you’re worried about the cost of your shopping, you can also get help from your local food bank. Websites such as the  can help you locate a food bank near you.

Parents may also be able to get free school meals for their children.

How to cut fuel costs

The cost of fuel is also on the rise, with diesel this week hitting £1.50 a litre for the first time ever.

The price of fuel can vary from one location to another, so it’s worth looking around for the best prices near you.

Petrol in Northern Ireland averaging more than 5p a litre cheaper than in the South East of England, the AA recently said.

While you might not be able to get your fuel from a different part of the country, you can still shop around to find the cheapest forecourt near you.

You can use  which shows the cost of fuel within a five-mile radius so you can save money.

When it comes to changing up a gear, it is most efficient to do it at 2,500 revs per minute (RPM) for a petrol car and 2,000 for diesel.

Try to check your rev counter to avoid over-revving, which wastes precious fuel.

Driving at 55-65mph instead of 70-80mph can also save you money, as your engine runs at a lower RPM, reducing fuel consumption by a quarter.

The AA recommends driving smoothly, accelerating gently and reading the road ahead to avoid braking unnecessarily and decelerating smoothly by releasing the accelerator in time, leaving the car in gear.

Stoping and starting uses up more fuel than a smoother slowing down ahead of lights and queues, and you could avoid braking completely if the lights change or traffic clears.

The motoring company also warns that extra weight can use up fuel, so remove anything from the car that you don’t need, and take off roof racks and boxes when not in use.

Air conditioning can increase fuel consumption at lower speeds, it advises, so at lower speeds it can be more economical to wind the window down instead.

Meanwhile, Martin Lewis has revealed how you can save £500 on your car insurance with one VERY simple trick.

How to save money on your mortgage

Make sure you shop around and don’t just assume your current provider can offer you the best deal when remortaging.

When your deal ends you’ll be put on the standard variable tariff, which is typically far more expensive than the best fixed-rate or tracker mortgage deals.

Unfortunately rates have already started rising in anticipation of the Bank of England’s rate rise.

Rates have been at historic lows though so you could still get a good deal, and Martin Lewis explained recently that there are still many below 1%.

It could pay to act now locking in a lower rate before they rise – a mortgage in principle lasts for between one and three months, depending on the bank.

You could get a better deal than before if you have improved your loan-to-value-ratio, your credit score has improved, or if you now earn more.

Put a note in your diary three months before your mortgage deal is up so you can start shopping around. 

You can use online tools such as MoneySavingExpert’s  and  to compare deals.

Shockingly half of homeowners have never remortgaged because they think it will be too much hassle.

You could also consider overpaying your mortgage if you can afford it, to get debt-free ahead of time.

With interest rates expected to rise here’s what it could mean for your savings and other borrowing too.

How to protect your pension

All workers over the age of 22 and earning more than £10,000 are automatically-enrolled into workplace pension schemes.

It may be tempting to stop making contributions if you are struggling with your bills so you can access some extra cash.

This is risky as millions of people are already facing an income shortfall in retirement because they are not saving enough.

If you do need some breathing space however, you can arrange a pension contribution holiday. 

Workers are entitled to leave their pension scheme at any time, and can do this by contacting the pension provider and opting out.

While it’s best to make this break as short as possible, if you do forget to opt back in auto-enrolment rules mean you’ll be automatically put back into the pension scheme after three years or if you move to a different employer.

How to protect your savings and cash

Inflation rising isn’t just a problem for your bills and food shop – as inflation rises, it erodes the spending power of your hard-earned cash.

That means if you have £100 in the bank and inflation is 3%, in a year’s time, the purchasing power of your money will have fallen to £97. 

So it’s important to make sure your money is working hard for you.

It’s almost impossible to find a savings account to beat inflation at the moment.

But rates are improving and you could be missing out on thousands of pounds if you keep your cash in the lowest paying accounts.

Martin Lewis has shared the best rates you’ll find at the moment and fixed-rate accounts are currently beating easy access.

These are good if you can afford to tie up your cash for a period of time

Meanwhile current account switching bonuses are back and you could get up o £130 just to move banks.

Credit cards with cashback offers could also give you money back every time you spend.

For example, American Express’s Platinum Cashback Everyday credit card pays 5% cashback on your purchases for the first three months.

There’s no fee for having the card but it is a credit card, so you should be prepared to pay off your balance in full every month to avoid racking up costly interest charges. 

Additionally, Santander’s 123 Lite account is another option for cashback fans.

It charges £2 a month, but you get cashback of up to 3% on the bills you pay from the account. 

But make sure you pay the balance off every month and on time so you don’t pay interest or fess, otherwise your cashbcak savings could be cancelled out.

 

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