The percentage of people whose earnings exceed the cost of bills and debts has fallen from 59% of those questioned to 57% while the figures for married couples covering their bills shows a tumble from 62% to 53%. More worrying is the 8% increase in numbers living beyond their means, now approaching 5.3 million people. Despite deteriorating circumstances, or perhaps because of them, most adults in the UK say they are more inclined to save than spend, with data revealing twice as many people are now more likely to save than to spend.
Rise in cost of living squeezes large part of the population
Commenting on these findings, Jonathan Latham, Director of Wealth Customer Marketing, L&G said, 'Investing for a rainy day has never been more important than now. It is encouraging that MoneyMood shows the overall trend reflects a mood to save rather than spend. However, for some, this sentiment has not been enough to keep the wolf from the door. As inflation takes its toll, the need for investing becomes even greater as digging into reserves looks inevitable for an increasing number, with nearly 5.3 million people now being forced to spend more than they earn. The harsh reality of today means the end of the ‘spend now pay later' culture". For more information and possible solutions, check out our website at www.legalandgeneral.com or seek independent financial advice.'
Credit crunch strikes
The impact of the credit crunch is clearly visible across the country. Analysing the results of the Survey, the most affected area is the North, where those spending more than they earn jumped by 82%, now representing 281,000 people, or 11.5% of the population. East Anglia and the North West showed the next largest increases of 51% and 47% respectively, now representing 13% of the population, or 243,139 and 652,470 people. Wales is in fourth position with a rise of 29% (7.5% of the population, or 180,375 people) and the West Midlands and East Midlands follow suit with increases of 20% (12% of the population; 516,860 people) and 17% (10% of the population; 355,869 people) respectively. London, which only saw an 8% increase, shows the largest proportion of the population spending more than they earn at 18%, nearly 1.1 million people. These statistics may, in part, be attributable to the ease and availability of credit seen in the years surveyed, together with the rapidly rising cost of living.
Nationwide, the number of people with cash left over after paying bills and servicing debt has dropped by nearly 1.2 million to just 57% of the population. Affluent Londoners have fared better than other areas, but even so there was a 7% decline in those having cash left over - the same percentage as in Yorkshire/Humberside and Scotland, with the North West dropping by 9%. The North looks to be the worst off with a decrease in those having any surplus cash of 17%. Sharing this plight is the East Midlands, which also clocked up a shortfall of 17%.
The Survey illustrates clearly that consumer confidence has been shaken, with every region in the UK witnessing a marked deterioration in the number of people having money left over after paying bills and debts.
Number spending on homes and entertainment plummets
Unsurprisingly, the number of people spending on homes and gardens has plummeted by over 20% and those forced to eliminate all spending on entertainment increased by 22%. Even supposedly cash-happy Londoners are feeling the pinch. In the capital, numbers spending on their homes has fallen by 23%, those curtailing all expenditure on their homes escalated by 32% and those spending on pubs, clubs and nights out have declined by 10%.
In the South West and South East, numbers spending on homes and gardens are down by 22% and 17% respectively. When it comes to nights out, however, the cutbacks have been less dramatic for these two regions registering 6% and 8% respectively. Where the number spending on entertainment has fallen considerably is in the East Midlands (16%) and the North West (14%). It is interesting to note that the North has not cut back as much as its neighbours, with those spending on nights out only falling by 4%.
One notable fact is that in the first six months of 2008, those questioned in every geographical area in the UK were worse off compared to 2005.
Living beyond their means
Looked at by age groups, it is clear that inflation is biting hard, with the number of people who are spending in excess of their income rising by 8%. Four out of the six age bands questioned saw an increase in numbers living beyond their means, with those over 65 suffering a dramatic 24% rise in numbers. This compares with an 18% increase in the 35-44 age bracket, 16% in the 25-34 age band and 7% in the 55-64 group. The 18-24 and 45-54 year-olds have adapted better to inflation, with a cut of 14% in numbers spending more than their earnings.
Those able to cover their costs increased by 18% in the 55-64 bracket but in the 25-34 year-old set the rise was only 6% and in the 35-44 year group, 3.5%. In the youngest age bracket of 18-24, the rise was just 1.5%.
The group that has surplus cash after paying bills and servicing debts has also been affected, with four out of six age bands showing a reduction. The only groups to show an increase in saying they had money left over were the 35-44 and 45-54 age ranges - and then it was only a 1.5% and 3% increase respectively.
Singles fare better
Married couples participating in the Survey showed an increase of 62% in those spending more than they earn and a drop in the number of those with money left over after bills and debts of 13.3%. Conversely, 28% fewer singles were spending more than they earn and those who just manage to cover their costs rose by 5%. The proportion of people with money left over after paying bills and servicing debt fell by 13% for those who are married and rose by 8% for singles.
Women are more adaptable to credit crunch
Of those polled, the number of men spending beyond their income is up 14% while for women those spending more than their earnings rose 4%. There is an increase of 6% in women questioned being able to cover their bills but a decline of 2% in men. The number of men with surplus cash after meeting their bills dropped by 3% and women by 2%.
Against this backcloth, the mood of the nation now is definitely one of saving rather than spending. The largest increase in the mood to save has been seen in the West Midlands and Yorkshire/Humberside, with increases in savers of 19%. The regions with the highest proportion of savers are East Anglia and Scotland, both with over 68% of the population preferring to save rather than spend at the moment. Close behind are Yorkshire/Humberside and the North with 66% also sharing this sentiment, demonstrating some truth to the adage of Yorkshire men and Scotsmen being the canniest savers. Despite this frugal sentiment, however, the reality is dismal, with the numbers of those in the mood to spend falling by 24% to just 23% of the population.
Jonathan added: " We would urge customers to review their finances and carefully look at their spending and savings habits. With some careful budgeting it is possible to keep on saving, even a small amount. If you are struggling financially, don't bury your head in the sand but speak to an adviser who can help you manage your financial situation."
