If in doubt, we are cutting spending out

The information provided in this article was accurate at the time of publishing and should be read in the context of the date it was published. Views in this article are those of the author alone and do not necessarily represent the view of Scottish Friendly.

The UK is stuck in a rut of economic uncertainty. The country is awaiting the outcome of Brexit negotiations and the impact this will have on the wider economy and, even though employment levels are continuing to rise, this is tempered by the reality that wages are stagnating in real terms as inflation increases but the size of our pay packets does not. In short, all signs are that households will now need to do more with less money.

The figures from our latest Disposable Income Index (DII) show that the median UK household has £1,078 left each month after paying for absolute essentials of housing, energy, water and a broader basket of goods including groceries, transport, childcare and broadband internet. These goods are required to play a full role in modern society. Money left at the end of the month is available for other key items like clothing, furniture and savings as well as luxuries like holidays.

The report reveals a creeping anxiety about our personal finances and the levels of debt families find themselves in too. More than four in ten (42%) people say they are worse off than 12 months ago as the cost of living rises. Meanwhile, eight in ten (82%) households say their financial situation isn’t improving and just over a third (35%) believe they will be better off in 12 months’ time.

In response to these worries our figures show more and more people are curbing their spending on ‘big ticket’ items. A third of households (33%) say they have delayed expensive purchases of cars, home improvements or TVs in the last 12 months. The majority (79%) of these respondents say they don’t have enough money to cover the cost. However, one in five (20%) cited uncertainty over prices as the main factor for postponing a purchase.

Little wonder then that many of us are deferring purchasing big ticket items as we wait to see if the financial situation will improve. As purse strings tighten in homes up and down the country the cumulative impact is already having a dampening effect on the UK economy and pessimism around the prospects for our personal finances is taking root.

In this kind of environment it’s vital that people make smart decisions when it comes to spending, borrowing and, most importantly, saving. Making your money work harder will help ease the pressure on households’ disposable income and getting the best deals when it comes to buying, selling or saving and investing should be top of mind.

No advice has been provided by Scottish Friendly. If you are in any doubt as to whether a savings or investment plan is suitable for you, you should contact a financial adviser for advice. If you do not have a financial adviser, you can get details of local financial advisers by visiting www.unbiased.co.uk. Advisers may charge for providing such advice and should confirm any cost beforehand.