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Millions forced to cut back on food and heating

Millions forced to cut back on food and heating

Category: Money
10/08/2018

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 It is now over 6 months old so the content may be out of date.

We all know that it can be difficult to make ends meet from time to time, yet thanks to rising inflation and the increasing cost of everything from food to heating bills, those on low incomes can face particular difficulty - so much so that many are forced to make worrying cutbacks.

That's according to the latest Financial Wellness Index, conducted by Bristol University and commissioned by Momentum UK. The results show that an estimated 4 million people have had to cut back on central heating in the last year just to get by, while an additional 6 million - equating to 12% of the UK's population - have had to reduce their food spend.

Unfortunately, this may not be a pattern that changes anytime soon: the study predicts that, with low wage growth and rising inflation reducing disposable incomes even further, low earners could be forced to make even more cutbacks in the coming months to make ends meet.

It isn't only these people who are feeling the pinch, either, with many others having to forego lifestyle expenses because of a lack of money. For example, 16% of respondents (equating to more than 8 million people) couldn't afford a holiday in the last 12 months, while 15% (more than 7 million) cut back on socialising.

Some aren't only cutting back - many are actually having to raise money through borrowing from friends and family (8%, equating to around 4 million people) or selling possessions (6%/3 million), while an additional 1 million have increased the amount borrowed on a credit card or overdraft.

Overall, the UK's Financial Wellness score stands at 69 out of 100, which means the typical household is "financially exposed": they may have a relatively comfortable standard of living, but they'd be susceptible to financial harm in the event of an unexpected economic shock (such as job loss or a fall in house price). However, one in 40 households are in the "financially distressed" group, whereby they're likely to face poverty and deprivation in their day-to-day lives, which means far more needs to be done to shore up the nation's finances.

How to manage your finances

Dominic Baliszewski, Momentum UK's director of Consumer Strategy, has devised the following tips to help people better manage their finances, which will hopefully mean fewer will be financially distressed.

  1. Dedicate time each month to your money. Set aside a small amount of time each month to make one change, such as switching a utility supplier, setting a budget or switching to a balance transfer credit card. It need only take 30 minutes, but as Dominic says, "the savings that can be made from adding these up over the course of a year are huge!"
  2. Put a bit of money aside for a rainy day. Try to set aside a certain amount of money each month to save for a rainy day. This may take a bit of discipline at first, but it should soon become a habit. The amount can be as little or large as you choose - you may even want to set a savings goal to boost you motivation - but just make sure to squirrel it away in a suitable savings account (or even a regular saver to really get in the habit).
  3. Take advantage of the best mortgage deals. Millions of people are currently on their lender's standard variable rate (SVR), which means they're probably paying far too much for their mortgage. Don't be one of them - if you haven't checked your mortgage rate in a while, you may have slipped onto an SVR without realising, but it's easy to switch to a better mortgage deal. And, if you're on a fixed rate at the moment, note down when the term ends, and make sure to compare the options when the time comes.
  4. Switch energy provider. Switching energy provider could save you a considerable amount of money over a year, potentially adding up to hundreds of pounds.
  5. Watch out for auto-renewal. Insurance policies will usually be automatically renewed at the end of the year unless you specify otherwise, and the price will often be ramped up in the process. Make a note of when your policies come to an end and compare insurance deals beforehand to be sure you're paying the best possible price. If you're not, switch!
  6. Monitor your direct debits. Monitoring your spending can make all the difference, and pay particular attention to direct debits. There's a chance your payments could change without you realising, and you may even find you're still paying for a subscription that you no longer use, so it's worth checking.
  7. Take advantage of discount codes and cashback sites. Never go shopping without seeing if you could get something extra! Dig out vouchers and discount codes, and make sure to use cashback sites whenever you shop online.
  8. Make sure your savings are working for you. You always want to be getting the best deal possible for your savings; start by checking out our savings Best Buys.

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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