5 Financial Tips to Tackle the Energy Bill Increase

Amidst ongoing speculation, Ofgem has now confirmed that millions of people will pay an extra £693 a year on their energy bills from April.

The energy price cap, which sets a maximum amount that suppliers can charge users for their energy bills, has seen a staggering increase from £1,277 to £1,971.

Given that research from digital financial coaching app Claro Moneyrevealed that 39% of UK households don’t have a household budget and that 29% of UK households’ income did not cover their outgoings, over the past 12 months, this increase is likely to cause further financial strain for many.

To help households plan for this energy bill increase, and reduce utility costs when possible, Rachel Harte, Head of Financial Planning at Claro Money, shares financial insight:

To Switch or Not to Switch?
When your energy bills are set to increase, it can be tempting to look for alternative suppliers straight away.

Whilst it is important to research suppliers to ensure your provider is suited to your utility needs, households are protected by Ofgem’s price cap so it may actually be more financially beneficial to stick to your current supplier rather than facilitate a last-minute swap.

If you have a deal or discount with your current supplier, then you will automatically roll on to the price cap when your deal ends, providing that you haven’t switched tariff. Switching suppliers can often cause you to incur more costs during the transitionary period and leave you with outstanding debts that you may have a limited amount of time to pay.

Cut Costs Elsewhere
For a great deal of UK adults, spikes in household costs and high levels of inflation doesn’t correlate to an increase in income. Therefore, there are often concerns as to where this money, to cover more expensive bills, will come from.

Take a look at your outgoings over the past few months and see if there are any regular expenses that you can cut down on. For example, would it be more cost effective to purchase a monthly or weekly ticket for any public transport you take, as opposed to individual tickets for each outing. Perhaps you could swap to own brand food products or cook meals with cheaper ingredients more regularly.

Small but consistent changes can make a real difference to your outgoings and help to cover these utility cost increases. However, if you cannot identify aspects of your spending that could be reduced, or you don’t want to have to sacrifice on the little luxuries, consider speaking to a financial coach or expert who can run through your budget with you.

Use Less Energy
Perhaps the most obvious way to reduce your energy bills is to reduce the amount of energy you use. As we approach the winter months, it’s near impossible not to increase your usage levels, especially as our homes get colder.

However, there are simple changes you can make to help reduce how much energy you are using. According to the Energy Saving Trust[1], one less dishwasher or washing machine wash a week can save £8 a year on your annual energy bill, whilst opting for LED bulbs will knock off £30 each year. Making several changes to your consumption levels will add up and help to keep the bills down.

Map out the habits you will change and get your entire household on board – whether that’s doing fewer clothes washes or combining washes if you live in a house share, turning the TV off when you’re not properly watching it, or only charging devices when necessary.

Keep Track of the Numbers
Putting good financial and energy habits into practice now is great, but it’s essential to keep track of your finances and energy usage as the months go on.

On the same day of each month, take a meter reading so that you can ensure your usage aligns with the amount you are being charged for and that you’re not paying too much.

Also keep on track of your monthly budget. Claro Money’s Mental Health Report revealed that a worrying number of households do not set a monthly budget (39%), however it’s not enough to just set a budget. Whether you’re budgeting as a family or individual, you should constantly review your spending and update your budget in line with this. If your energy bills are more or less expensive than anticipated, you should make a note of this and adapt the remainder of your monthly budget accordingly. This will allow you to map out the month’s finances more realistically and avoid you going over budget if there have been any surprises in your outgoings.

Plan for the Long Term
Unfortunately, it is anticipated that the cost of energy bills will increase further in 2022, so it’s a good idea to begin planning for this and saving in advance, where possible.

If you have managed to reduce your outgoings and have saved more money than needed to cover your energy bills, then try to set this money aside in a separate pot for utilities that you can dip into further down the line. Alongside small habitual changes, such as turning off your lights when not in use, consider investing in more eco-friendly and energy-saving appliances, if you have the means to do so. The energy label of an appliance tells you how much energy it uses and is a good way to compare different makes and models

Take into consideration your long-term finances separate to covering essential costs. It is important to establish your financial goals and objectives for next year, such as building up your savings, buying a car, going on holiday etc. Think about how an increase in outgoings for the necessities may impact your ability to achieve these goals and what you might have to do to compensate for this, whether that is setting aside more savings at the start of each month or sacrificing certain luxuries.

So, there you have it, five ways to prepare your finances for the upcoming energy bills increase and reduce your usage.