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Households struggle to pay the bills

Households struggle to pay the bills

Category: Money

Updated: 21/02/2014
First Published: 21/02/2014

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

There has been an increase in households struggling to make ends meet, with many finding it hard to ensure their income covers all their outgoings.

According to research by Legal & General, one in eight homes (12.6%) are currently struggling to make their earnings cover all their bills and debts, experiencing a shortfall of available funds, and this is up from one in 10 last year.

In fact, the shortfall is getting worse, with the average amount households lack each month to cover the essentials hitting £85, double the figure reported in January 2013 of £42.

The increase in monthly shortfall appears to be affecting a lot of the country with households in the East Midlands lacking £124 a month – up £99 from last year – with Londoners' shortfall showing a rise of £95 and the North West up £55.

However, there is good news for the three regions that have reduced their shortfall compared to a year ago. The South West has seen a reduction of £88, Wales £1 and the North East £41.

John Pollock of Legal & General said: "Despite January inflation falling below 2% for the first time in 10 years, our MoneyMood survey shows we are not yet seeing any strong signs of recovery in household finances.

"Gas and electricity costs are not yet showing signs of coming down and this may be a key factor in holding back improvement of household finances. The ONS reported that the cost of gas and electricity has been one of the largest contributors to inflation over the last 27 months."

Many households use their credit card to manage their finances, and although this can get you out of a sticky situation temporarily, it is not a long-term solution. Overdrafts and loans are other methods people use to get a little extra cash and although this is ok for one-off payments, if you are constantly dipping into them and going over budget then you may find it escalating so it's harder to get back into the black.

If this sounds familiar, you need to do something about it fairly soon. Here are a few ways you can help to make your incomings closer to matching your outgoings:

  • Take a look at your monthly outgoings and see if there is anywhere you can cut costs. Make a list of essential and non-essential outgoings and compare it to the amount you've got coming in – if it doesn't add up, be ruthless with non-essential spending.
  • Perhaps you have a few existing loans. Consider consolidating them with a combined personal loan bringing everything into one place.
  • Perhaps there are places you can easily cut back – little things that can make all the difference. Perhaps you could make your own sandwiches for lunch, have a night in with a bottle of wine rather than buying drinks down the pub or have a movie night at home rather than paying for cinema tickets – you'll soon notice the difference it makes to your wallet, without having to compromise on fun.
  • Once you have got out of debt, don't fall back into bad habits. Put a little aside each month in a savings account so you have something to fall back on if necessary.

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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