British families are being urged to take immediate action on their finances as the relentless cost of living squeeze continues, with everyday expenses and energy costs putting pressure on household budgets.
Energy Cap Rise Adds to Financial Strain
The financial challenge for many was compounded at the start of the year. On 1 January 2026, the Ofgem Energy Price Cap increased by 0.2 per cent. This adjustment means the typical annual bill for a household on a standard variable tariff is now £1,758, leading to an average monthly increase of around 28p for users in England, Scotland, and Wales.
In light of these persistent pressures, Laura Purkess, a personal finance expert at Investing Insiders, has issued clear guidance. She emphasises that decisive steps taken now can lead to significant improvement by the year's end. "If you want to clear a pile of debt or start building up some savings, there’s no better time to start than right now," Purkess stated. "Getting on top of your finances early can set you up well for the rest of the year."
Five Key Steps to Financial Health
Purkess recommends a structured five-point plan for anyone looking to regain control of their money in 2026.
1. Prioritise High-Interest Debt
The first and most critical step is to tackle existing debt. Focus on paying off loans or credit cards with the highest interest rates first, such as costly payday loans, as these accumulate the most over time. For credit card debt, consider switching to a debit card to limit spending or moving balances to a 0 per cent credit card to halt interest growth. For serious debt issues, free help is available from StepChange, Citizens Advice, or National Debtline.
2. Conduct a Spending Audit
Understanding where your money goes is essential. Review several months of bank statements to identify wasteful spending. Look for unused subscriptions, multiple streaming services, or expensive habits like frequent dining out. You can often negotiate better deals on gym memberships or phone contracts by simply asking or threatening to switch providers. Redirect any money saved directly into a savings pot.
3. Maximise Your Savings Returns
Once you begin to save, make your money work harder. Seek out the best savings rates, which currently offer just over 4 per cent interest, often from digital or challenger banks. For long-term savings, consider a cash ISA to protect returns from tax. If you have a lump sum you can afford to lock away, fixed-rate accounts or bonds typically offer superior rates compared to easy-access options.
4. Consider Investing for the Future
After establishing a savings buffer and clearing debt, investing could offer better long-term returns. Open a stocks and shares ISA or a trading account. Remember, investments can go down as well as up and should be viewed as a long-term commitment of five years or more to ride out market fluctuations.
5. Set Specific Financial Goals
Finally, define clear objectives, whether it's saving for a house deposit, a dream holiday, or an early retirement. Having a specific goal makes it easier to stay motivated and avoid dipping into reserved funds, helping you maintain financial discipline through market changes or tempting splurges.
By following this expert blueprint, UK households can build a more secure financial foundation despite the ongoing economic headwinds.
