Winter Money Management: Top Strategies for Smart Financial Planning
7th December 2023
Winter can be hard on your finances, with the high heating bills and seasonal expenses. The added costs of presents, trips and parties can make this season especially difficult for many of us.
This is where careful financial planning comes in.
To make winter less stressful, we can plan ahead and create a budget for extra expenses. In this article, we have put together some money management tips that can help you manage your finances during the colder months.
Create a winter-specific budget
Use Zero Based Budgeting
Zero Based budgeting could help you track every pound to spend it most efficiently.
A zero-based budget means giving every pound a purpose in your take-home pay, aiming to balance what you earn and spend to hit zero each month. It's not about spending everything; instead, it's intentional, assigning portions to savings goals like emergency funds and retirement. Nothing happens to your money by chance. In contrast, traditional budgeting sets limits for each category, but exceeding them doesn't have immediate consequences. With zero-based budgeting, you use the money you have now to set spending limits, ensuring every pound has a real purpose, not just a vague idea.
Understand your current financial position
Make a list of what you owe and check how you're doing financially. To budget effectively, you need to know where your money is going. To do that, review your income, savings, and expenses. Account for all your debts and find out your overall financial health.
Expert Tip: Simplify the process by using online budgeting tools or apps like Money Dashboard. These platforms are designed to optimise your spending habits and show clear insights into how you spend your money. This can be a valuable resource to understand your financial position.
Create an estimated list of expenses
When you plan for winter expenses, think about categories like heating, warm clothes and the Christmas period. Create a budget that clearly allocates enough money for every category of expenses. Having a detailed plan will make it easier to manage.
Expert Tip: Don't forget to allocate a buffer for emergencies. Winter can bring unexpected expenses like home or car repairs. To avoid budget disruptions, you should have an emergency fund.
Plan for the Christmas season
The December festivities often bring about increased spending on gifts, decorations and celebrations. It is important to plan it in a way that you do not end up feeling stressed later:
- Make a list of the gifts you need to buy and allocate a spending limit for each. This prevents overspending on impulse purchases.
- Get an early start on your Christmas shopping to take advantage of sales and discounts. Many retailers offer promotions in the months leading up to the festive season.
- Think about making your own gifts. They are more economical and add a personalised touch.
- Realise that budgeting for different months will vary. So, the Christmas season will generally have more expenses and lesser savings compared to other months.
Energy Saving Tips for the Winter Season
1. Turn down the radiators
If you're not using certain rooms, dial down the radiator valves for them.
You might think that turning off the radiators completely is a good idea. But, this actually makes the boiler work harder later to heat the room again. Instead, to save energy and prevent mould and damp, set the radiators to a low temperature.
People over the age of 65, children below 5 years, and those with health problems are more vulnerable to cold. To stay warm, healthy, and comfortable, keep the indoor temperature at 18°C.
2. Install an energy-efficient showerhead
Using energy-efficient shower heads can reduce water usage by controlling the flow or aerating the water. They are readily available at any home improvement store and can be installed independently. Some water companies even provide them for free to promote conservation efforts.
If you have an electric shower, however, then this is not for you. Instead, you may use the "eco mode".
3. Reduce your boiler flow
If you have a Combi boiler, you can make it work better by changing the 'flow temperature' dial to 60 degrees.
Also, note that reducing the flow temperature is not the same as lowering the thermostat setting. While reducing the flow might take a bit longer to warm up, it won't noticeably affect the overall temperature of your home.
If you're 65+ years old or have health issues, you can adjust the flow temperature to 65°C. This will help warm your home quickly and keep you cosy.
4. Bleed your radiators
By bleeding your radiators, or removing the air pockets from the radiator, you reduce the pressure on it. This helps warm your home faster and reduces the cost of energy bills.
5. Install a smart meter
A smart meter shows how much energy you use with a full display in your home. These send readings directly to your energy supplier. Also, the meter lets you see how much you are spending to provide more control over energy usage.
If you're interested, reach out to your energy supplier. They can set it up for free.
6. Draught-proof your home
Draught-proofing is a very affordable and effective way to keep heat from escaping and ultimately, reducing your energy bills. You should block the unwanted gaps around floors, doors and windows that leak the warm air out.
Be careful not to cover up fans or air vents like air bricks and extractor fans. Instead, you can install a window film, which is like temporary secondary glazing. These are quite easy to install on your own. Alternatively, you can also seek assistance from a professional.
Exploring financial assistance options
Government schemes and support available in the UK
With the arrival of winter, the UK government is working to help households in need. They have implemented laws and support schemes to make sure that people are safe and comfortable during the cold months.
Let us go through a few of these initiatives:
1. Energy price guarantee
The 'Energy Price Guarantee' was started by the UK in October 2022. It aims to reduce the unit cost of electricity and gas used by households. This price reduction is automatic and given to all households.
From October 2022 to June 2023, the government provided financial support to energy customers, capping the typical household dual-fuel bill at £2,500 instead of following Ofgem's fluctuating price cap. This support ended on June 30, 2023, as Ofgem's July price cap dropped below the government's Energy Price Guarantee (EPG) of £2,500. Since July 1, 2023, customer prices have been determined by Ofgem's price cap.
Please remember, that there is no need to apply for this, and you will never be asked for bank details.
2. Winter fuel payments
In winter, pensioners (born before 25 September 1957) can get £250 and £600 to help pay for heating bills.
This year, pensioners also get a one-time payment called the Pensioner Cost of Living Payment. The amount ranges between £150 and £300.
This extra payment is added as a top-up to the Winter Fuel Payment automatically. You can check your eligibility here.
3. Cold weather payments
If you get certain specific benefits, you might qualify for an extra £25 each week in winter. This happens when the temperature stays at zero or below that for over seven days.
You can check your eligibility for this.
4. Warm home discount
In the autumn, nearly three million low-income households could get a £150 discount on their winter electricity bills.
If you live in England and Wales, you can expect to get a letter confirming your eligibility by January 2024. If you live in Scotland, you will have to contact your energy supplier and ask about the rebate.
You can check your eligibility here.
5. 0% VAT on energy-saving materials
Over the next five years, it will be cheaper to install energy-saving materials like insulation or solar panels. This is because there will be 0% VAT. It can help make your home more energy-efficient and keep your heating bills down.
To sum it up, planning ahead, saving energy, and knowing where to get help can make winter easier on your wallet. By being smart with money and resources, you set the stage for a more comfortable and worry-free season.