Yahoo Finance Households £3,280 poorer than a year ago
Family bills have increased by £4,000 in a year, but during the same time period incomes have only risen £720.
Increased spending on essential bills, including food and transport, has caused a £4,000 surge in household outgoings over the past year, according to a new report.
The average family is now spending £341 more on travel, £233 more on food and £221 more on energy bills than a year ago, found the study of family finances in the UK by insurer Aviva.
But while spending on essentials shot up, incomes failed to keep pace; an increase of just £720 means household disposable income is down £3,280 in little more than 12 months.
However, as conditions for families toughen, they have generally battened down the hatches, spending less and preparing for worse yet by setting more money aside in savings.
Households have had little choice but to sacrifice non-essential spending. Money going towards sport, leisure and personal goods has dropped over the past year. The amount being spent on motoring costs has also dropped, suggesting families are cutting usage to save money.
Overall families are embracing austerity measures rather than using credit to supplement spending, as the number of households using debt to bridge a shortfall has also decreased.
But at the same time more money collectively is being spent on debt, which shows that borrowing has become more concentrated – the households that do turn to debt are taking on more and more.
Single parents seem to be among the worst affected by the squeeze, as they are the most likely to turn to short-time borrowing to bridge funding gaps, 14% now use payday loans compared with the overall average of 6%.
The number of lone parents using payday loans and pawnbrokers in an effort to get by has also increased over the past year, while the average for all households has not changed.
[Related feature: Debt survival kit ]
However, generally people appear to be going above and beyond to build a rainy day fund to avoid expensive emergency borrowing. The typical savings pot of a family is now £1,277 – an increase of £310 over a year – quite the feat when disposable income is dropping and savings rates have remained pitifully low.
Louise Colley, head of protection sales and marketing at Aviva, said: “This latest report reveals a mixed bag of fortunes for UK families as they face higher living costs set against relatively stagnant incomes.
“However, it’s promising to see that families are adjusting their spending habits to take account of these changes.”
[Related feature: The best ways to pay off debt]
