Do you know how much your annual bills add up to? While many of us like to think that we stick to a budget and know exactly where our money goes, research from Santander Current Accounts suggests that many of us could be drastically underestimating the cost of our bills – something which could have a significant impact on financial security.
Santander's figures show that bill payers underestimated their main expenses (which include council tax, utilities and TV, phone and broadband) by an average of £1,459 last year, estimating their typical bills to be £2,528, well below the actual annual total of £3,987. Across the UK as a whole, this underestimation adds up to a whopping £39 billion.
TV, phone and broadband outgoings were found to be the most significantly underestimated – perhaps unsurprising given additional research from the Advertising Standards Authority finding that many broadband adverts are highly misleading – with households estimating annual spend on these bills to be 53% lower than actual costs.
But just why do so many people underestimate the cost of their bills? Well, while misleading adverts can sometimes be to blame, there are other times when people simply don't pay enough attention to their budgets or bank statements: almost a third (30%) of bill payers admit that they don't read their statements thoroughly, while 5% don't even open them, so it's no wonder that there's a notable lack of awareness around household costs.
Perhaps as a result of these underestimations, many households struggle to cover the cost of their household bills: 34% say they can only just make ends meet, while 25% admit to borrowing money or using their savings to pay the bills, and 6% claim they often or never have enough money to cover them.
If this sounds familiar, it's time to be more proactive. You can start by analysing your bank statements so you know exactly where your money goes and how much you spend on bills, and from there you can make a budget that'll help you stay on top of things. Consider setting up direct debits for certain bills, too, as not only can this often be cheaper (gas and electricity providers, for example, often give discounts if you pay in this way), but you needn't worry about missing a payment, either.
After that, you'll probably want to compare utility providers to see if you can cut some of your bills down to size, and don't forget about insurance policies if they're coming up for renewal. And what about installing a smart meter? Santander found that 12% of respondents are monitoring their energy consumption by using smart meters, and this could be a great way to reduce costs.
"It can be difficult to keep track of bills and price changes," said Matt Hall, Director of Banking at Santander, "and in winter months, when bills may rise, it's even more important to make your money go further." So get in control! Now's a great time to renew your annual expenditure, so start having a clear idea of where your money goes and you hopefully won't be caught out by unexpectedly high bills in the future.
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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