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Scary stats released today by protection specialist Bright Grey show that almost 7 million UK adults regularly spend more than they earn. Equally worrying is the fact that a further 5 million do not know whether they are currently living within their means or not. It also seems that 82% of us have not changed our spending habits in the last 12 months, putting paid to suggestions that the recession has brought about an increase in frugal living.
The 'Salary Gap' study shows that the average adult needs to earn £1,706 net of tax each month to live comfortably. However, the average monthly wage is 27% lower than this, an average personal deficit of £4,320 per year. It is easy to see that racking up debts at this rate without a significant increase in earnings must eventually lead to financial difficulty. However there seems to be a widespread lack of concern about the consequences - 21% of respondents say that they would not be willing to give up their lifestyle because they enjoy it too much.
So what is it costing to keep us in the style to which we've become accustomed? The study shows that personal leisure (eating out, going on holiday and other leisure activities) costs an average of £362 per person each month. Men spend more on their lifestyles than women do - £445 per month compared to a women's average of £155. This is not apparently due to the fact that men earn more on average (although they do, by £5,352 after tax each year). Men spend on average 29% of their monthly pay on their personal lifestyle whilst women spend only 26%.
The survey also reveals how Britons funding this ongoing party. 20% of those surveyed use credit, in the form of personal loans and credit cards, and 16% use the current account overdraft supplied by their bank. A total of 37% of people say that their household budgeting is affected, with some saying that their household finances are currently in debt as a result of their spending. The most common reason for overspending is 'just because I have to' (30%), followed by the 21% that won't compromise on their lifestyle, 15% who claim to be hopeless with money and 11% who admit to living off credit to keep up with higher-earning friends.
Roger Edwards, proposition director at Bright Grey said: "Even in an Age of Austerity the public's spending shows no sign of waning, as the average UK adult continues to spend beyond their means and rack up debt… Whether it is recording your incomings and outgoings on a scrap bit of paper, holding a family AGM to discuss finances or purchasing a protection product to make sure you are secure if you were to lose your income, simple financial planning now will mean you won't have to worry in the future. By reducing your spending by as little as 5%, and using the savings for a protection product, you can ensure you protect your lifestyle and the remaining 95% of your finances. It really is a case of spend a little, protect the lot."
Check out the SimplyFinance.co.uk website for budgeting calculators that can help you plan your finances more effectively.