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Households will need to find £381 extra a year

Households will need to find £381 extra a year

Category: Money

Updated: 18/09/2014
First Published: 18/09/2014

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 It is now over 6 months old so the content may be out of date.

The household budget is something that always seems to be under pressure. As the cost of living rises, household funds get squeezed more and more in order to simply maintain the same way of life. And things are unlikely to get better any time soon. According to MGM Advantage, the average UK household will be expected to find another £381 a year in order to sustain current living standards.

Under pressure

Recently announced figures show that inflation in the UK grew by 1.5% in August, down from 1.6% in July, and it's anticipated that wage growth is likely to remain stagnant for some time. This means that households will have to find other ways of filling the gaps in their household budgets, as Aston Goodey, of MGM Advantage, points out: "Until we see some real wage growth, people will continue to feel the pinch of the cost of living."

So, as inflation makes its presence felt, and wages stubbornly refuse to rise, UK households have little choice but to trim back their spending in order to balance the books.

Cutting down

A survey conducted by MGM Advantage clearly highlights the stress household budgets are under.

Of those surveyed, 51% said that they had had to start streamlining their spending in order to meet living costs. And from this group, 63% said that they had had to cut down their food bills, while another 56% claimed that they had reduced their energy use in order to keep bills under budget. This demonstrates that many households have to cut essential spending in order to meet costs, rather than trimming down on treats and superfluous spending. Consequently, standards of living could be compromised.

Retirement worries

Household budgets are evidently under strain, but there is a possibility of things getting better if wages start to rise, even though that may not happen in the near-future. But what happens to those on a fixed income, such as retirees?

Unsurprisingly, 53% of adults questioned in the survey said that the rising cost of living was their biggest fear for retirement. Aston Goodey comments: "We shouldn't ignore those in retirement, who are typically on fixed incomes. They face the challenge of not only ensuring that their savings last as long as they do, but also need to try and maintain a standard of living."

Balancing the budget

So what can be done to fill the household budget gap? And what can those approaching retirement do to ensure that their golden years are spent with a standard of living that meets their retirement expectations?

Well, the first thing to do is to make sure money isn't being wasted on expensive utility tariffs. Switching energy provider, or shopping around for a new broadband deal, could save you precious pennies. For energy, try looking beyond the big six. Smaller independent companies are currently riding high on positive public opinion due to their lower costs, so why not take a look at what they have to offer? Selecting dual fuel options and paying by direct debit can also shave some money off your bills. You can start searching for a new energy rate with our handy comparison tool.

Having some cash set aside for emergencies can also help to ease financial worries. Setting aside some money regularly in an instant access savings account can provide a nice buffer in case the boiler brakes down or the car fails its MOT. Start your search for a savings account that suits you by checking out our best buys.

Finally, if retirement is worrying you, it's time to start making plans. Next year sees the introduction of a wave of changes that will affect your retirement options, so you will have more choice about what to do with your pension pot than ever before. If you're not sure what to do, but you want to ensure you have a comfortable retirement, speak to an independent advisor. They can help you to "navigate the income maze" and find a retirement solution to suit your needs.

What next?

Compare gas and electricity prices with our useful tool

Find a savings account to suit you

Check out our retirement guides to get informed about your retirement options

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.