Too much month left at the end of your money?

25th February 2012  

There are further indications that the squeeze on take-home pay is getting ever tighter in a new report claiming that the average British worker is financially broke just 17 days after being paid.

The study, carried out by UK banking chain Halifax, highlights the nightmare that faces cash-strapped wage earners, and explains the rise in popularity of payday loans and an increase in the use of credit cards to pay off household bills.

It seems that the wages freeze and economic full stop have really begun to bite hard into the pockets of the average Brit. While wage levels have stagnated, the price of every day essentials such as food, fuel and heating continue to climb. The result is that there is literally too much month left at the end of the money for the majority of workers.

According to study which questioned 2,000 adults, one in ten admit to struggling financially within just a week of being paid. The result is at least a fortnight of worry until that next pay cheque hits the account. If unforeseen bills crop up, like a car repair bill or broken washing machine, the situation is untenable without a loan or credit cards to fall back on.

Rainy days, and nothing put aside

With interest rates at an all-time low, consumers fail to see the benefit of putting money by and saving; however for most families the lack of spare cash at the end of the month means the concept of putting a little aside aside to cover those rainy days is no longer an option anyway.

With the crisis in the Eurozone threatening to de-stabilise the fragile economic recovery in the UK, it seems that there will be no immediate let-up for stressed out and impoverished workers. 2012 seems to be set as a year where most people will quite literally live from pay cheque to pay cheque.

Payday loans have seen a huge increase in popularity in recent months, but financial watchers are concerned that this simply leads to a cycle of debt that can be difficult to break out of. ‘Robbing Peter to pay Paul’ isn’t the basis of sound management of personal finances and it seems that the more logical and manageable solution to smoothing over the bumps in the road could be our old friend, the credit card.

Spreading the cost of living

A plethora of New Year studies show that consumers have been leaning on their credit cards more and more in recent months, and not just for those little ‘treats’ in the January sales.

Recent surveys have shown that more people are using credit cards to cover the costs of day to day living, from paying for the weekly grocery shopping to filling up the car. Managed carefully, credit cards could be a temporary solution to temporary financial blips, but as always the message is not to rely on any one source of credit on a long term basis.

Workers are continually being squeezed financially from all sides, and 2012 could see personal debt levels start to climb again. ‘Personal asset’ lender Borro has reported that the average loan in 2010 was £1,000. In 2011 it climbed to a worrying £3,500 and concerns are that this year it could rise to over £5,000.

That could undermine all the austerity measures that the government has thrown at us over the last 12 months, as even if wages do remain on ice for another year, the rise in personal debt is bound to start impacting our fragile economy once again. It won’t be another credit crunch as such, but it is difficult to predict just how far this silent recession’s shock waves could reach.

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