Christmas – and its costs – are round the corner. but many are already stretching themselves. ..financially. Aisha Iqbal reports.
Half of all Yorkshire households are living beyond their means, with one in ten of us spending more than we can afford to appear better off than we are.
A new survey has found that half of all adults overspend by almost £150 a month.
And while rising living expenses coupled with frozen wages are a factor, many of us are maxing out the cards because we don’t want children to go without, or we just struggle to resist buying new things.
The study by Aviva also found that – despite a general enforced belt-tightening – many people still spend more money than they earn to create an image of false wealth, and because they don’t realise they are overspending until it’s too late.
Millions are also failing to put money aside into savings or pay into pensions because they don’t have any money left over at the end of the month, or because they think they are too young to worry about life post-retirement.
Tim Orton, Product Director for Aviva UK Pension and Investments, who commissioned the study, said: “It has been a tough few years for people financially.
“Money has been tight, but worryingly, rather than cutting back, it seems there are some who are continuing to live way beyond their means.
“Given the level of debt in the country and an ageing population it’s hard to see how future governments will be able to support people in the way they have in the past.
“Building personal debt now, let alone failing to make any provisions for retirement, could lead to significant problems in the future.
“Whilst it’s reassuring to see that more than half of those surveyed are making regular contributions to a savings or pension pot every month, there are a still a large number of people who are overlooking these important financial priorities.”
The study found that 48 per cent of consumers don’t always live within their means, with one in ten often relying on credit cards and overdrafts to get them through each month.
But, while 40 per cent put their overspending down to simply not earning enough to cover their day-to-day costs, more than one in ten are guilty of wanting to appear to have more money than they do.
Almost a quarter stretch themselves financially to make sure their children don’t go without, while 21 per cent just can’t resist buying things, even if they can’t afford it.
It also emerged that 42 per cent of people admit they see credit cards and overdrafts as an extension of their bank balance.
One in five don’t, or wouldn’t, change their lifestyle to reflect their financial situation, with the internet named as the one thing people would be least willing to give up, even if it meant living beyond their means. Mobile phones and annual holidays are also among the list of things we cannot be without, regardless of our bank balance.
The research revealed that with so many living beyond their means, savings and pensions are being neglected with around one in seven saying they never put money aside. Just 55 per cent currently contribute into a pension.
Of those who don’t, 42 per cent said they don’t have the extra money to put aside at the end of each month, while 17 per cent are concentrating their spare funds on paying off debts.
Mr Orton continued: “Making some small changes to our spending can have a big impact on the pot of money we end up with in retirement. Simply taking lunch to work each day or not buying a morning coffee can equate to £20 per week, £80 per month, £960 per year or the equivalent of more than £40,000 over an average working life.
“Furthermore, because of the tax relief you receive on pension contributions, for every £80 per month you pay into your pension the Government pays an additional £20 per month, for most people.
“We can all make some adjustments that could make a material difference in the future.
“A few indulgences now and again can be an important part of enjoying life, but creating and sticking to some simple savings goals will undoubtedly pay dividends in the longer term.”
Luxury or necessity?
Top ten things we wouldn’t give up, even if it meant living beyond our means, according to the study by Aviva:
2. Mobile phone
3. Annual holiday
4. Running a car/motorbike
5. Takeaways/meals out
6. A night out with friends
7. Sky TV subscription
8. Pay into my pension
10. Pay for life insurance/ critical illness