Half of Brits are now living beyond their means, a study has revealed. Researchers found that not earning enough to cover living expenses, not wanting children to go without and struggling to resist buying new things mean half of all adults overspend by almost £150 a month.
Others spend more money than they earn to create an image of false wealth or because they simply don’t realize they are overspending until it’s too late.
It also emerged that millions of spend-happy Brits are 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.
Tim Orton, Product Director for Aviva UK Pension & Investments, which 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.
”Building personal debt now, let alone failing to make any provisions for retirement, could lead to significant problems in the future.
”Given the level of debt the country has, as well as an aging population, it’s hard to see how future governments will be able to support people in the way they have in the past.
”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 of 2,000 adults, found that 48 per cent 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.
Not realising they don’t have the money until after they have bought things, losing jobs and having to get used to living on a reduced salary are among the other reasons for living beyond their means.
It also emerged that 42 per cent of people admit they see credit cards and overdrafts as an extension of their bank balance, with 60 per cent admitting they need to make more effort to stay in the black.
One in five don’t, or wouldn’t, change their lifestyle to reflect their financial situation, with the internet named as the thing Brits would be least willing to give up, even if it meant living beyond their means.
Mobile phone, annual holidays and even a night out with friends are also among the list of things we would keep spending on, regardless of our bank balance.
But 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, paying an average of #105 per month.
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.
More than one in ten considers themselves too young to have to worry about their retirement yet.
Researchers also found that eight in ten Brits admit they think a lot of people have their priorities wrong when it comes to spending and saving money.
And three in ten have ended up rowing with their partner because one of them was overspending.
Tim Ortonm from Aviva UK Pension & Investments added: ”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 #80pm you pay into your pension the Government pays an additional #20pm for most people.
”When you think about it in these simple terms 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.”
THE TOP TEN ‘ESSENTIALS’, REGARDLESS OF INCOME
1. Internet/broadband
2. Mobile phone
3. Annual holiday
4. Run a car/motorbike
5. A takeaway/meal out
6. A night out with friends
7. Sky TV subscription
8. Pay into my pension
9. Haircut/colour
10. Pay for life insurance/ critical illness