Rising bills are rapidly outstripping income
Families are now overspending on bills and essentials by more than £325 a month as rising costs rapidly outstrip income, according to the MoneySuperMarket Money Index. Research from the Money Index shows the average UK household is spending £325 more per month on essentials than they should.
The UK’s average take home pay has dropped 15% in just three months, MoneySuperMarket data shows – with the average Brit now taking home £2,170.92 compared to £2,558.58 in October, with 54% now earning less than £30,000 a year in gross income.
Kelly Miles, 33, and partner Cameron, 32, from Portsmouth, who live with children Jensen, 11 and Lilah, nine, say soaring bill costs are making it challenging for them to put money aside for a house deposit – as they currently spend 63% of their household income on essentials.
The 50/30/20 method of budgeting advises that families spend 50% on ‘essentials’ – such as mortgage or rent, bills, food and travel – while 30% should go to ‘wants’, such as gyms or streaming and 20% on savings or paying off debt.
Kelly said: “We really want to get out of the rental cycle and buy our first house next year, but it can be so hard to put money aside when your bills are increasing. We are definitely feeling squeezed at the moment. I have set a target of saving £1,000 a month for our house, but it’s not easy when we spend around 60 to 70% of our income on bills.”
Kelly went on: “Our combined income is just over £4000 and our rent alone is £1245 after it went up recently. Then our car insurance, energy and water bills have all increased too. Our water bill used to be about £30 and now it’s closer to £80. Some of the percentages might not feel like a lot individually, but they all add up and have an impact.
“When you’re saving for a house it’s so much harder, and takes so much longer, because that money you spent on the water bill is money you can’t put in savings. Then on top of that, you have to cope with the added feelings of anxiety and failure if you don’t manage to meet the target you’ve set for yourself. So it isn’t always easy.
“We have had to make sacrifices too – I used to work part-time, but as a family we couldn’t afford for me to not work full-time, so I’m now back at five days a week. My partner had a pay rise in that time too, so our household income has increased to £75,000.
“The extra income has helped, but we still struggle to meet our monthly savings target.”
Kelly and Cameron are now working with MoneySuperMarket’s financial experts. Kelly said: “I’m hoping with the help from MoneySuperMarket’s experts this year we will be able to rebalance our finances and be able to put a bit more money aside as a family.
“Being able to get out of the rental cycle and buy our own home would make a huge difference to us.”
Kara Gammell, Personal Finance Expert at MoneySuperMarket said: “With UK incomes under pressure, many households are feeling the squeeze, and when that happens, sticking to budgeting rules such as the 50‑30‑20 model can become more difficult.
“But making a few simple switches can help bring everyday spending back into balance. While some bills – such as council tax – most households can’t reduce, there are many others where you may be able to cut costs. This includes broadband, energy, and home, pet or travel insurance, to name a few. Reviewing these bills and switching where appropriate can free up money for day‑to‑day spending, or savings.
“Inflation slowing is welcome news, but with interest rate cuts expected this year, savers should stay proactive to ensure their money is working as hard as possible.”
Kara added: “My tip is to list all your monthly bills, note when contracts or policies are due for renewal, and diarise these dates. When they approach, set aside a few minutes to compare deals – whether that’s broadband, energy, home or car insurance, or mobile phones. With MoneySuperMarket’s SuperSaveClub, you can earn rewards of up to £15 each time you switch an eligible product, up to £130 a year. Plus, our Price Promise means you can feel confident you’re getting great value.”
