As Scotland emerges from Covid, hopes we would be entering a better future appear to be getting dashed quite quickly.

The truth is we are now facing another crisis, in the form of the rising living costs, which over the next year is likely to see gas and electricity prices soar, accompanied by food and fuel prices.

At present inflation is averaging around 5%, but in all likelihood, it could rise to 7%: a level not seen in decades.

However, for most families the real level of inflation is likely to be more, as the truth is lower- and middle-income families tend to spend a higher proportion of their income on those items that are seeing the highest levels of inflation, such as gas, electricity, and petrol.

Also, as more and more businesses begin to return to the workplace, ending working at home, this will place increased travelling costs on many families and, therefore, additional pressure on budgets.

What can be done if your household finances are under pressure?

The problem for many households is that as the cost-of-living increases, it’s not easy to budget. Many of our household essentials are fixed. Mortgage, rent, council tax etc. Some expenditure we might be able to reduce by switching suppliers, such as insurances and broadband providers, but most of these savings will be marginal in what are already highly competitive markets.

However, if people are struggling with their household budgets against a backdrop of rising costs, then they should look at all their household expenditure to see where savings can be made.

So, if our fuel bills are increasing, even if we can’t make savings in relation to them, we should look at where else we can make savings.

But making Savings isn’t as easy as many suggest

The problem is inflation is affecting many of our essential expenditure, so reducing costs is not easy. How do you cut your expenditure on food, when prices are rising and you are already receiving less for your money? The same applies for other items and with the domestic energy markets effectively dysfunctional, with over 30 companies believed to have collapsed in the last year, switching providers will not bring the benefits it once did.

The truth is for many, once they have looked at their budget, the only place they will be able to make savings will be in relation to debt payments, such as credit cards and loans. These costs, however, are also often fixed, and require a minimum payment each month.

Could the Scottish Debt Arrangement Scheme work?

It may be, however,  for some Scottish consumers, the Debt Arrangement Scheme may provide some form of solution. Not only because it may allow people to make reduced payments to their debts, whilst also freezing interest and charges, but because unlike other formal debt solutions in Scotland, there is no requirement under the law that when you make a proposal under the Scheme, that you have to offer your creditors all your disposable income.

This little known feature of the Debt Arrangement Scheme may become a game changer in the coming period, when many are looking for help with their debts. 

It means, that even if you are in debt and need a solution for repaying those debts, you can set up a plan that still has a cushion built into it that will allow you to make a proposal to your creditors that doesn’t mean you have to give them all your disposable income each month.

The benefit of this, is that cushion may still allow you to absorb any further cost of living increases over the coming months and years, without having to miss any payments to your  Scheme.

What is the Debt Arrangement Scheme?

The Scottish Debt Arrangement Scheme is a Scottish Government Scheme, that is not a type of insolvency and allows you to repay your debts over a reasonable period.

It does not need to affect your car, even if you have it on finance, or your home, providing you make your payments as normal. 

It also protects you from Sheriff Officers and all you pay each month, is one payment, which is distributed to all your creditors by a Payment Distributor.

The Debt Arrangement Scheme is also free, so every penny you pay, goes to reducing your debts. If you want to see if the Debt Arrangement Scheme is suitable for you, use our tool below, or speak to us on Messenger.