Consumers are walking a tightrope with their finances, according to new research by uSwitch.com.
23% just ‘break even’ at the end of every month, leaving no contingency money for unforeseen emergencies such as a rise in bills, a boiler breakdown or a hike in fares.
A further 7% of consumers actually spend more than they earn, relying on overdrafts (37%), savings (28%) and credit cards (23%) to plug the gap.
Overall, 39% are struggling to make ends meet and have been forced to cut back on everyday essentials. 28% are spending less on food and 19% have reduced their fuel consumption. Things were set to get better in 2012 – but 14% of consumers say that they are worse off now than they were 12 months ago.
Even for the 26% who have managed to avoid cutting back this year, there is little to celebrate. Rising food costs, energy price hikes and fuel and rail fare hikes just around the corner January mean that very few are likely to escape the squeeze. In fact, three-quarters (75%) of consumers are entering the festive season worried about their financial situation.
For the 34% who have suffered a pay freeze over the last 12 months, and the further 8% who have actually had their pay cut, balancing the books has been even tougher this year, uSwitch said.
To make ends meet, consumers have borrowed an average of £1,950 on top of their mortgages – but only 26% have managed to pay it all back. As well as cutting back on essentials, in a bid to boost finances, 22% have started taking a packed lunch to work, 16% have resorted to flogging their belongings in return for hard cash, while 13% have taken on extra work to boost their income.
What consumers are cutting back on to make ends meet?
|Gifts for friends/family||29%|
“When it comes to balancing the books, we are treading a fine line,” said Michael Ossei, personal finance spokesperson at uSwitch.com. “It will only take an unexpected price hike or emergency at home to push us over the edge and into the debt spiral.
“For many consumers, everything is shooting up except their income. Unprecedented hikes in essential bills such as food and energy are forming an increasingly large hole in people’s pockets. The shock increase in the consumer price index in November will do nothing to help the situation. We are facing a winter of discontent.”