46% of UK households say that they would struggle to cope if their monthly outgoings rose by £99. We look at how you can create some financial 'breathing space' to help you out if you lose your job or become ill.
Research from Halifax shows that a large proportion of Britons fear they wouldn't have sufficient cash to cope if the price of their 'essential items' went up significantly.
Interestingly, it's people in their 40s (51%) and 50s (53%) who feel most vulnerable. Even worse, 18% of these two age groups say they’d find it hard to cope if monthly outgoings rose by only £24 a month! That leaves very little wiggle room if inflation starts to rise.
What's more, a large number of people are concerned that they’ll struggle to find any money to stick in a savings account over the next year.
Concerned about ability to save money for the future over the next 12 months
|
Age group |
% concerned about ability to save money for the future |
|
20s |
62% |
|
30s |
73% |
|
40s |
68% |
|
50s |
66% |
|
60s |
51% |
|
70-75 |
36% |
|
All UK households |
62% |
Source: Halifax
The age groups who expect to find it hardest to save are people in their 30s and 40s. That’s worrying because people in those age groups should ideally be putting money aside for their retirement. But with children to support and prices of essentials such as energy rising, that’s easier said than done.
Turning to housing costs, once again it’s people in their 30s and 40s who are most worried they may not have enough cash to keep up their mortgage payments or rent.
Concerned about paying mortgage/rent over the next 12 months
|
Age group |
% concerned about ability to pay rent/mortgage |
|
20s |
36% |
|
30s |
37% |
|
40s |
39% |
|
50s |
31% |
|
60s |
17% |
|
70-75 |
10% |
|
All UK households |
32% |
Source: Halifax
There’s a clear theme here. A lot of people are very stretched financially and would be in serious difficulty if their circumstances changed for the worse.
What can you do?
Put simply, most of us need to find more spare cash that we can then save. By spending less and saving more, you could increase your ‘financial breathing space'.
Of course, that’s easier said than done, but at Lovemoney we’re convinced that better budgeting can make a difference for a lot of people.
If you’re not budgeting yet, start. And if you already have a budget, get it out and take a close look.
Does it cover all your spending right down to a Mars bar or apple? If there isn’t that level of detail, keep a record of all your spending for a month. Hopefully, you’ll then be able to spot more areas where you could cut back.
Drawing up the budget is only the first step – sticking to it is just as important. That’s where Lovemoney’s MoneyTrack tool comes in. You can set budget goals with the tool and then check to see whether you’re sticking with those goals every day.
That’s because MoneyTrack allows you to see all your bank accounts and credit cards on just one screen, and it also automatically categories all your spending. For example, the categories include ‘Eating out, pubs & takeaways’ and ‘Clothes/accessories.’ So it then becomes really easy to see whether you’re hitting your budget targets or not.
Never budgeted
If you’ve never budgeted before, you can get loads more information on how to start in our ‘big budget month’ series that we ran last year. You can also find more tips in ‘Set a budget and stick to it.’
Other things
Of course, budgeting isn’t the only thing you can change or improve.
You may also be able to save extra cash by shopping around more and always getting the very best deal. Don’t just accept the renewal quote on your car insurance each year. Make sure you compare all the leading deals on the market. Do the same with your home insurance. Read more in The true cost of not shopping around for car and home insurance.
It’s also worth making sure that you’re getting the best deal for your gas and electricity. Check every year that you’re on the best tariff for you.
And remember that millions of Britons are entitled to Government support for paying energy bills. Your energy provider should be able to tell you if you’re eligible. Contact the Home Heat Helpline if you need further assistance.
Boost your income
As well as checking that you’re getting all the benefits and credits to which you’re entitled, consider whether you could find some extra cash to save by doing more work. Maybe get some overtime or a second job.
Granted, that isn’t a realistic option for many folk, but it works well for some people.
Or you could get extra cash by taking in a lodger. Thanks to the Government’s Rent-a-Room scheme, you could earn up to £4,250 a year from renting out your spare room, and you won’t have to pay any tax.
Remember if you had a lodger for five years, you could build up a £21,000 savings pot that could tide you over if you became ill or lost your job. And if the pot was still intact when you retired, some of it could pay for a few nice holidays in your early years as a pensioner.
Keep trying
Stabilising your finances is no easy task for most of us. But if you’re worried that you won’t be able to cope if your monthly outgoings rise by just £25, it’s well worth following all the steps we’ve outlined in this article.
Yes, it’s possible you won’t be able to find any changes you can make, but it’s still worth going through the whole process. After all, even just an extra £40 a month could give you some welcome financial breathing space.
- Check out our MoneyTrack budgeting tool.
More help on improving household finances:
Where to get help with paying your energy bills
The best broadband freebies and incentives