Household debt in the UK (excluding mortgages) has risen by 48% in the past year, from an average of £5,360 in January 2011, to £7,944 January 2012. This equates to 32% of a typical household income which is £24,792 as of January this year. These findings come from the latest Aviva Family Finance Report.
The findings show that many families are now building onto existing debt as opposed to clearing them.
Families are also saving slightly less in comparison to this time last year. As of January 2012, the average amount a family puts away each month is £21 in comparison to £22 in January 2011. This figures peaked in August 2011 where the typical amount saved by each family was £34 per month.
Over this time period, the average wage increase for a typical family has only risen by 7% (£1,937 in January 2011 to £2,066 January 2012). Some families have seen a decrease in their income. Divorced, widowed, and separated parents saw a decrease in their wage of 22%.
However, the amount of families who don’t put any money towards their savings has dropped from 33% last year to 30% this year. This shows that more families are attempting to save money, possibly in an attempt to protect themselves from unforeseen circumstances relating to the rising cost of living, and the ever present danger of unemployment.
The findings also show that 60% of families do not have any form of protection insurance which means that they are at risk of getting into trouble financially if their circumstances worsen.
Although inflation has been increasing over the past year, household expenditure has mostly remained steady during this time. Housing remains the largest expense for families averaging 20% of their income. Food expense has remained at 10% over the past year, suggesting that more families are budgeting and choosing items of better value.
Families are also planning to spend less on non-essential items. As of this month 22% of families say that they will not be spending money on personal items. 30% of those asked say that they will not be spending any money for entertainment, recreation purposes, or on holidays.
The findings show that 62% of families are worried about the rising costs of living, a further 46% are worried about the risk of redundancy and 41% are worried about being able to meet the costs of any unexpected expenses.
Head of protection sales and marketing for Aviva, Louise Colley says:
“Families in the UK are still very concerned by the rising cost of living and levels of unemployment. While average incomes have increased over the past year, the prices of essential goods and services have also increased, meaning that families are struggling to keep up.
"Many appear to have acclimatised to this economic environment by shopping around and seeking to minimise their spending in certain areas. However, at the same time there are still a worrying number of families with insufficient savings or large debts.
“Although many families are trying to build a savings cushion, this report clearly demonstrates that they also need to consider a protection buffer – protecting themselves against those unexpected financial shocks, such as having a serious illness or worse still, a death.
"The impact of not having protection in place can be devastating at what is already a hugely difficult time. Around half of families say they are planning to get their finances in order in 2012, so for their peace of mind, we’d strongly urge them to put protection at the top of their list.”
Trying to save for the future is important however, this will be a difficult task for those struggling with debt issues.
Should you find yourself struggling with debts, contact The Debt Advisor today and speak to a member of our team on freephone 0800 085 1825.
There are a range of options available from debt management, IVA, bankruptcy and full & final arrangements.
The Debt Advisor are committed to offering best advice at all times and are members of DEMSA and DRF.