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Such is the cost of living today that British households require almost £4,000 a month just to feel financially secure. But, as years of pay freezes and economic gloom take their toll, new research shows that the average household falls £1,500 a month short of achieving this. The data from uSwitch.com has revealed that 35% of Brits define financial security as having enough money to cover basic day-to-day living costs without having to rely on credit. But just 40% are in this position. The second most popular definition is to have at least six months' salary in the bank (16%), but again, just 35% have this. For 14% of people, financial security means not having any debt on credit cards or loans, or an overdraft to repay. With inflation falling, there is some good news for consumers. But many are still struggling to recover from recent increases in the cost of living, including energy, petrol and food. Since 2004, energy bills alone have rocketed by 140% – outstripping income, which has risen at a rate of just 20%. These increases were made worse for many as they weren't offset by pay rises. Although recent figures show that wage increases in the private sector rose faster than UK inflation last quarter for the first time in three years, just 30% of workers said they expect a pay rise this year, and almost two thirds (65%) have suffered a pay freeze in recent years. Michael Ossei, personal finance expert at uSwitch.com, said: “The dream of financial security seems a long way off becoming a reality for many. Years of pay freezes and the rising cost of living have hit consumers hard and led to a financial nightmare. It's unlikely that things will get better quickly, with few people expecting pay rises, the majority of homes are unlikely to see any rise in their monthly income, let alone the sort of increase they feel they need. “What is encouraging though is that so many people associate financial security with not relying on debt. Cutting back on credit and reducing your debt in the current climate is one of the best things you can do and will put more people back in control of their finances. “While many may feel unable to save, putting away as little as £10 or £20 per month can help to build a savings pot. Saving a little and often can make a big difference and cutting back on household bills like energy could free up some cash to help you feel more financially secure.” Other Business Money News
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