Inflation may have fallen slightly today but British households are struggling to pay bills as the high cost of living hits hard.
Inflation (based on the Consumer Prices Index or CPI) has fallen to 5% (from 5.2%) which may at first glance seem good news. It has been driven down largely as a result of the UK supermarkets price war, even though there is continued pressure from rising energy prices.
The issue for households though is that, according to moneysupermarket.com, they are already spending over a quarter of their monthly income on essential bills, such as utilities, telecoms and insurance and that’s without taking into account mortgage/rent and debt repayments.
The pressure on income is not being helped by a widespread freeze on salaries, meaning the income value has dropped in real terms as inflation remains high.
Kevin Mountford continued: “With no sign of the inflation falling and economic situation improving anytime soon, consumers need to ensure they are doing everything in their power to reduce their bills and overall expenditure.
“Households will be amazed at how much they can trim for their household budget by simply sitting down, going through finances and shopping around to see where they are overspending.
“Switching to cheaper products, or moving expensive debts over to cheaper forms of borrowing, can help free up cash which is vital at a time when the cost of living has been putting the nation’s wallets under severe pressure.”
Inflation is not though just hitting households trying to keep up with bill payments with their salary, it is also hitting those with savings accounts hard.
Analysis by independent financial research company Defaqto has found that only six (0.3%) of the 1,999 savings accounts available give a real rate of return to basic rate taxpayers based on the Consumer Prices Index (CPI)
MoneyHighStreet comments: “Clearly with pressures coming both on spending as well as saving, consumers need to make sure they are getting the best deals to save money on bills and to get the best return on savings.
Savers need to review their savings on a regular basis to make sure they are getting the best available returns – making use of ISA allowances and taking advantage of introductory bonuses offered for example.
As we reported yesterday, may are families are employing Christmas present tactics to help save money, including ‘Secret Santa’ and agreeing a financial limit for gifts. It’s good to see some creative thinking.